What happened
An industry rival is reportedly interested in acquiring storm window and door manufacturer PGT Innovations (PGTI), and investors are excited about the potential for a payout. Shares of PGT were up 18% for the week as of midday Thursday, according to data provided by S&P Global Market Intelligence, on hopes that a deal can get done.
So what
PGT manufactures and distributes building products throughout the Sun Belt and Pacific Northwest through more than half a dozen brands.
The company is reportedly attracting interest from a deep-pocketed rival. On Tuesday, Reuters reported that Miter Brands, a competitor backed by Koch Industries, had offered $33 per share to acquire PGT. That's well above PGT's $26.20 closing price on Monday prior to the report.
PGT's board rejected the offer as inadequate, according to Reuters, but the suitor is said to be considering a sweetened $36-per-share offer. Although there is no guarantee Miter will follow through on that offer, or that it will be accepted, investors are bidding up shares of PGT in anticipation of a potential deal getting done.
Now what
PGT's board has some leverage if it wants to play hard to get. The company in March adopted a so-called poison pill that prevents any investor from accumulating 10% or more of its shares for a period of 12 months, a move that makes a hostile takeover nearly impossible.
So if Miter or any other suitor wants to acquire PGT, it is going to have to do so via a consensual deal with the company's board.
Miter is run by Matt DeSoto, who owns it along with Koch Equity. That's an investment affiliate of Koch Industries, one of the largest private companies in the U.S. with annual sales of more than $100 billion. If Miter does want to go beyond the $1.9 billion price it has reportedly offered, the company should have the resources to finance a larger deal.
Investors are understandably excited, and if a new, sweetened offer is made public, expect PGT's stock to jump again in response. But until the two sides come to an agreement there is no guarantee that offer will translate into real cash for individual shareholders.
There is reason for optimism here, but investors need to be aware that if Miter decides to walk away or PGT rejects any forthcoming offers there is a decent chance shares of PGT will surrender the gains they have enjoyed based on the report. The door is open to an offer, but investors should remain cautious until the deal is sealed.
