Caxton-Iseman Capital agreed to acquire Nortek Inc.’s window, door and siding unit, Ply Gem Industries, in a roughly $570 million transaction. The deal comes almost one year after Kelso & Co.’s acquisition of Nortek in a $1.6 billion transaction.
“We’ve been looking at deals in the housing sector for several years now,” said Frederick Iseman, chairman and managing principal with Caxton-Iseman. “Apart from interest rates, where there is some vulnerability, the non-financial big picture of housing in the U.S. is very good right now. And Ply Gem is one of the largest manufacturers of vinyl siding, windows, doors and fencing.”
To finance the transaction, Caxton-Iseman has teamed with UBS Loan Finance, which has offered stapled financing that will take the form of senior and subordinated debt. Deutsche Bank, CIBC World Markets and Merrill Lynch will also assist with the debt package. Caxton-Iseman, for its part, will provide $135 million in equity, while Ply Gem management will contribute another $5 million equity stake.
According to published reports, the $570 million purchase price comes in well below the $700 million Nortek was at one time anticipating. The relatively depressed valuation was arrived at in spite of a fairly crowded auction that included Cypress Group, Investcorp, Apollo Management and Jordan Company, according to sources.
Nortek divested Ply Gem in its effort to more closely focus on its core ventilation, heating and cooling businesses. Ply Gem, which markets its products under the Variform, Great Lakes, Napco, CWD and Kroy brand names, in 2002 reported approximately $509 million in net sales, and employs around 2,600 workers.
Caxton-Iseman invests out of a $2.25 billion investment pool provided by Caxton Corp., the firm’s sole limited partner. The Ply Gem deal represents the New York firm’s second-largest deal to date, behind the Buffets Inc. acquisition, a transaction that won Buyouts’ 2000 public-to-private deal of the year. The closing of the Ply Gem sale is expected to occur in the first quarter.