PGTI - PGT Innovations soars amid reported $33 rejected offer; unlikely to accept higher bid

2023-10-10 13:04:35 ET

PGT Innovations ( NYSE: PGTI ) jumped 21% amid a report that the door maker rejected a $33 per share cash bid from rival Miter Brands.

PGT ( PGTI ) rejected a fully-financed $1.9 billion offe r from Miter, a competitor backed by Koch Industries,saying it was inadequate, according to a Reuters report late Monday. Miter is considering increasing its offer to $36 a share, one source said. There's no certainty that Miter will continue its pursuit of PGT.

"While the article also pointed to Miter potentially raising its bid to $36/share, we believe PGTI is unlikely to accept this offer as well, as, following its March adoption of a shareholder rights plan, which prevents any investor from accumulating a position of 10% or more for a period of 12 months, the company, in our view, is committed to executing on its strategy of solid organic growth as well as acquiring complementary assets and companies that offer synergies and further enhance and expand its footprint," JPMorgan analyst Michael Rehaut wrote in a note on Tuesday.

Rehault has a neutral rating on PGTI and established a December 2024 price target of $33.

Truist analyst Keith Hughes wrote that while the $33 offer would likely not be welcomed by shareholders, a $36 offer "may be moving into the ballpark of what investors would like to see for an offer."

At $33, a share would value PGTI at roughly 9.4x EV/EBITDA on Truist's 2023 estimate, which would be slightly above average valuation, according to Hughes, who has a buy rating and $32 price target. The $36 bid would value PGTI at roughly 10.1x EV/EBITDA, a valuation that is toward the upper end of its range. Both prices would be all-time highs for PGTI's share price.

"We believe that this is the range that investors would be more likely to vote for a deal," Hughes added.

Truist's Hughes sees a low probability that other bidders will emerge for PGT ( PGTI ) given the difficult financing market for private equity and PE ownership of other strategic players.

The takeover news comes after PGT ( PGTI ) in March adopted a limited-duration shareholder rights plan after an unidentified strategic investor accumulated shares, sending its shares up almost 10% on March 31. At the time, analysts said the company could see $33 to $37 a share in a takeover.

For further details see: