July 17, 2018 / 10:42 PM / in a month

U.S. building product firms NCI and Ply Gem to merge

(Reuters) - U.S. building product makers NCI Building Systems Inc (NCS.N) and privately-held Ply Gem Parent LLC said on Tuesday they will merge in an all-stock deal, creating a company with an equity valuation of about $2.6 billion.

Under the deal, NCI will issue 58.7 million shares, worth $1.2 billion at Tuesday’s closing price, to Ply Gem. NCI will own 53 percent of the new combined company and the rest will be held by Ply Gem shareholders.

Ply Gem, which sells home exteriors like vinyl sidings and windows, was bought out by private equity firm Clayton, Dubilier & Rice (CD&R) in January and merged with Atrium Windows and Doors.

The deal will immediately add to adjusted earnings and free cash flow, the companies said in a statement. Cost reduction initiatives and merger-related synergies should yield over $150 million in annual cost savings after three years, they said.

NCI chairman James Metcalf will serve as the chief executive officer and chairman of the combined company, while Shawn Poe, Ply Gem’s chief financial officer, will be CFO.

Revenues in 2018 on a combined basis would be around $4.5 billion. The deal is expected to close in the fourth quarter of 2018.

Golden Gate Capital, a major shareholder of Ply Gem via its holding in Atrium, will wind up with about 16 percent of the new company.

Shares of NCI were up 3 percent in extended trading on Tuesday.

Evercore is the financial adviser and Wachtell, Lipton, Rosen & Katz is serving as legal counsel to NCI. Credit Suisse is the financial adviser to Ply Gem, while Debevoise & Plimpton is providing legal counsel to Ply Gem and to CD&R.

The company will be headquartered in Cary, North Carolina, with a significant presence in Houston, Texas.

Reporting by Sanjana Shivdas and Arjun Panchadar in Bengaluru; editing by Anil D'Silva and Rosalba O'Brien

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