NEW YORK (
Fortune Brands Home & Security Inc.
(FBHS - Get Report)
, the home hardware and security products company best known for making Master Locks, announced this week it will acquire closely-held bathroom cabinetry maker WoodCrafters Home Products LLC for about $300 million.
WoodCrafters with $230 million in sales annually and 2,000 employees, operates eight locations, including manufacturing facilities and two showrooms in southern Texas and northern Mexico. WoodCrafters will operate as a business unit of MasterBrand Cabinets Inc., Deerfield, Ill.,
Fortune Brands surged 6.1% to close at $39.72.
"The purchase price of $300 million should be equivalent to 7.5 times annual Ebitda. However, over the next couple of years, potential synergies resulting from the acquisition could reduce the purchase multiple to closer to 6 times Ebitda," Chief Financial Officer E. Lee Wyatt said on a Thursday investor conference call.
WoodCrafters was founded in 1983 with 20 workers and a single assembly line. Fortune Bands CEO Chris Klein characterized the deal as a bet on the recovering housing market.
"WoodCrafters will become part of our cabinets business, where we have historically been strong in the kitchen. This will greatly increase our product offerings in the bathroom," he said. "The cabinet market is experiencing early stages of recovery."
Sales for MasterBrand were $345 million for the quarter, up 11%, or $34 million, from the same period last year. Operating income was $15 million, as compared to a $4 million loss for the corresponding period last year. "Our planning assumptions call for the market for U.S. home products to be up 8% to 10%, with new construction growing in the mid-20% range," Wyatt added on the call.
MasterBrand Cabinets president Dave Randich will head the target company under Fortune's ownership.
"With the market in the early stages of a recovery and particularly as the repair and remodel market begins to gain momentum, it's a great time to build on our leading position in cabinets and further strengthen our efficient and responsive North American supply chain," Klein said on the call. He said the company would continue looking for accretive acquisitions.