Cornerstone taken private by CD&R in $5.8bn deal

May 2022 | DEALFRONT | PRIVATE EQUITY & VENTURE CAPITAL

Financier Worldwide Magazine

May 2022 Issue

Cornerstone Building Brands has entered into a definitive agreement to be acquired by affiliates of US private equity firm Clayton, Dubilier & Rice (CD&R) in an all-cash transaction with an enterprise value of approximately $5.8bn, including the assumption of debt.

The deal, which is expected to close in the second or third quarter of 2022, is subject to customary closing conditions, including receipt of regulatory approvals. The transaction is also subject to approval by holders of a majority of the shares not owned by CD&R and its affiliates. CD&R currently owns about 49 percent of Cornerstone’s common stock.

The proposed transaction has been approved by a special committee of independent directors of the Cornerstone board previously formed to evaluate and consider any potential or actual proposal from CD&R. The company’s board has approved the proposed transaction on the recommendation of the special committee.

Under the terms of the deal, Cornerstone Building Brands’ shareholders will receive $24.65 in cash per share, representing an approximately 16 percent premium to the closing price of the company’s common stock on 4 March 2022, and an approximately 75 percent premium to the closing price of the company’s common stock as of 4 February 2022, the last trading day prior to speculation in the market regarding a potential transaction.

Cornerstone was founded in 2018 through the merger of CD&R-backed NCI Building Systems and Ply Gem. CD&R first invested in NCI in 2009. The company is the largest manufacturer of exterior building products for residential and low-rise non-residential buildings in North America, including vinyl windows, vinyl siding, stone veneer, metal roofing, metal wall systems and metal accessories.

“We believe this transaction provides substantial value for our shareholders while also accelerating Cornerstone Building Brands’ aspiration to become a premier exterior building solutions company,” said Rose Lee, president and chief executive of Cornerstone Building Brands. “We have grown our business and portfolio since 2018 when the Company was created, delivering high-quality exterior building products with a strong focus on being a partner of choice for our customers. CD&R will continue to be an outstanding partner as we advance our operational improvements and innovation-driven growth to create many positive outcomes for our customers and employees.”

“We are pleased to have reached this agreement with CD&R, which delivers a significant and immediate cash premium to our shareholders,” said George L. Ball, chair of the special committee. “The Special Committee thoroughly reviewed CD&R’s proposal, considering the benefits of the transaction against other strategic alternatives available to the Company, including continuing as a publicly-traded company. Following this review, the Board determined this transaction is the best path forward for Cornerstone Building Brands and its shareholders. This transaction reflects the significant value of our business and leadership position in the building products industry.”

“As a supportive long-term investor over a number of years, we have seen firsthand the significant value that Cornerstone Building Brands brings to its customers and communities across North America,” said J.L. Zrebiec, a partner at CD&R. “The Company has an outstanding team and portfolio of products well-positioned to meet the needs of today’s evolving market. We are confident that as a privately held company, with CD&R’s operational and strategic support, Cornerstone Building Brands will be even better positioned in its next phase of growth.”

Since the firm’s formation, CD&R has managed the investment of more than $40bn in over 100 companies with an aggregate transaction value of approximately $175bn.

Building products transactions have increased markedly over the last two years. The outbreak of the coronavirus (COVID-19) pandemic prompted a wave of home renovations and purchases as people increasingly worked from home.

Richard Summerfield