Shares of building products maker Ply Gem Holdings Inc (NYSE: PGEM) are up more than $3.30 per share to $21.42 as of 12:10 p.m. EST on Jan. 31. The big jump is related to a press release announcing that the company has entered into a definitive agreement to be acquired by private equity firm Clayton, Dubilier & Rice in an all-cash deal worth $2.4 billion.
According to the terms of the deal, CD&R will pay shareholders of record $21.64 per share in cash when the deal closes, which is expected to happen in the second quarter of 2018. CD&R announced it had also entered into an agreement to acquire a portion of privately held Atrium Windows & Doors, with plans to combine that company with Ply Gem.
Together, the new company would generate some $2.4 billion in annual sales of exterior building products. Once the two deals complete, CD&R would own 70% of the combined company, with the remaining 30% being held by other private equity groups with a stake in Atrium.
It may be tempting to hold on to your shares or buy in on speculation of a competitive bid running up the price for Ply Gem, but that's not a tactic I would recommend. Ply Gem shareholders owning more than 50% of the company have already issued written consent approving the transaction, so this is essentially a done deal.
There are two reasons current investors may want to consider holding until the deal closes: First, if you have owned your shares for less than one year and they're in a taxable account. If you can get past the one-year mark, it would be the difference between being taxed 15% (or 20%) as a long-term gain, or your marginal income tax rate (which would certainly be higher) as a short-term gain. Secont, if you don't have any better ideas for the proceeds, you would get the full $21.64 per share if you hold until the closing, about a 1% premium above today's price.
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