BEACHWOOD, Ohio - MasterBrand, Inc. (NYSE: MBC), a leading North American residential cabinet manufacturer, has entered into a definitive agreement to purchase Supreme Cabinetry Brands, Inc. for $520 million in cash. The transaction is expected to close in the third quarter of 2024, subject to regulatory approvals and customary closing conditions.
The acquisition is set to enhance MasterBrand's product range, dealer network, and consumer value delivery. Supreme Cabinetry Brands is known for its growth and profitability, and the merger is anticipated to generate $28 million in cost synergies by the end of the third year post-closing.
This synergy is expected to arise from procurement, facility optimization, and overhead expenses. Moreover, the deal is projected to be accretive to MasterBrand's adjusted diluted earnings per share within the first full year after the acquisition's completion.
MasterBrand's President and CEO, Dave Banyard, emphasized the strategic fit of the acquisition, noting that Supreme's premium cabinetry products would bolster MasterBrand's portfolio and accelerate its growth strategy. Supreme's CEO, Tony Sugalski, expressed enthusiasm about joining forces with MasterBrand, highlighting the combined service level and craftsmanship that will benefit customers and consumers.
MasterBrand plans to finance the acquisition through cash on hand and existing credit facilities, with additional support from an incremental debt commitment by JPMorgan Chase (NYSE:JPM) Bank, N.A. Following the transaction, MasterBrand expects its pro forma net debt to adjusted EBITDA to be between 2.4 and 2.6 times, with a target to reduce this ratio to below 2.0 times within two years after closing.
Rothschild & Co serves as MasterBrand's exclusive financial advisor, while Skadden, Arps, Slate, Meagher & Flom LLP acts as legal counsel for the transaction.
InvestingPro Insights
As MasterBrand, Inc. (NYSE: MBC) gears up for its strategic acquisition of Supreme Cabinetry Brands, Inc., a glance at the company's financial health and market performance provides insight into its readiness for this significant transaction. MasterBrand boasts a strong shareholder yield, which is a promising sign for investors looking for returns through buybacks and debt paydowns. This is reflected in the company's high 6-month price total return of 25.95%, indicating a robust uptick in its share price over the last half-year period.
With a market capitalization of $2.07 billion and a P/E ratio standing at a competitive 11.78, MasterBrand trades at a low price-to-earnings ratio relative to its near-term earnings growth. This suggests that the company is potentially undervalued considering its earnings outlook. Additionally, the adjusted P/E ratio for the last twelve months as of Q1 2024 further reinforces this perspective, coming in at 10.99.
From a liquidity standpoint, MasterBrand is well-positioned, as its liquid assets exceed short-term obligations. This financial stability is critical when undertaking large acquisitions like that of Supreme Cabinetry Brands, ensuring that MasterBrand can manage its short-term liabilities effectively during the integration process. With analysts predicting profitability for the current year and the company having been profitable over the last twelve months, MasterBrand appears to be on solid footing as it expands its market presence.
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