UPDATED — Houston-based Quanex Building Products Corp. acquired HL Plastics Ltd., a United Kingdom vinyl window profile extruder, in a $149 million purchase that expands its presence in the international housing market.
Part of Flamstead Holdings Ltd., the all-cash deal also includes Wegoma Machinery Sales Ltd. — a maker of PVC and aluminum manufacturing machines for the window fabrication market — and Vintage Windows Ltd., a niche window maker.
With more than $600 million in sales, Quanex is a leading supplier of window and door components to OEMs. In this transaction, Quanex officials see complementary product growth opportunities to HL customers of conservatory roofs, hardware, foam trim products and more.
In addition to a geographic reach across the United Kingdom and Ireland, HL has a new vinyl extrusion facility and has built up a good reputation for its Liniar brand name, which accounts for more than 85 percent of its sales, according to Quanex. The Liniar line includes products for windows, doors and conservatories.
Denby, England-based HL, which also manufactures fencing, decking, water retention barriers and related products, had sales of $101 million in the last 12 months and earnings before interest, taxes, depreciation and amortization (EBITDA) of $18 million, according to a Quanex presentation filed with the U.S. Securities Exchange Commission.
"Quanex's growth strategy is predicated on improved profitability in our core businesses, as well as the acquisition of businesses that contribute proven technologies, products and enhanced scale,” Chairman, President and CEO Bill Griffiths said in a June 16 news release announcing the transaction. “The acquisition of HL delivers on all fronts, as it should contribute top and bottom line growth, an expanded presence in the favorable U.K. market, and access to new, complementary product lines.”
With 200 product shapes, HL claims to be the fastest growing vinyl extruder in the United Kingdom, and it serves an attractive high-end, low complexity market, the eight-page Quanex presentation says.
The timing of the deal also is right, according to Quanex, pointing to this period as an early stage of the U.K. housing recovery and noting it could be a platform for future growth in Europe. Quanex cited a 25 percent increase in U.K. housing starts in 2014, but also says that like the United States, demand is heavily weighted toward the replacement and remodeling activity.
In addition, co-branding opportunities exist with Liniar's energy-efficient PVC windows and PVC-based veranda and decking, which have a recycled content base, bi-fold doors and proprietary conservatory roof system, according to Quanex.
Quanex completed the purchase from shareholders on June 15, agreeing to fund the deal with cash and $92 million from credit lenders. Quanex expects the purchase to be accretive in 2016 with estimates between $0.20 and $0.25 per share.
The deal should allow Quanex to leverage its existing expertise in the U.K. market, which comes from its 2011 acquisition of Edgetech I.G. Inc. for $107 million. Edgetech has a U.K. base in Coventry, England, and makes insulating glass spacer systems for the window and door industry.
In the current transaction, Flamstead became a wholly owned subsidiary of Quanex. The current HL management team will stay on board. HL has 420 employees.
"Quanex enjoys a clear leadership position as a preeminent component supplier to the fenestration industry, and as such represents a logical and compelling strategic fit for HL at this beneficial inflection point in the UK housing market,” HL Plastics CEO Roger Hartshorn said in a news release. Hartshorn will continue as group CEO for at least five years.
“My commitment has always been to launch new and exciting products for the benefit of our customers, and to generate employment opportunities to stimulate the economy — and with the Quanex resources behind us, we will unlock the potential to achieve even greater success,” Hartshorn added.
Tarpey Harris Ltd. and Flamstead Investments Ltd., the remaining companies in the Flamstead Group owned by Hartshorn, will see no change.
Wells Fargo Securities served as financial advisor for Quanex and Travers Smith LLP served as its legal counsel.