Masonite acquisition deal on track to return, pending shareholder approval

By Paul A. Harris

St. Louis, Feb. 18 - The Stile Acquisition Corp./Masonite International Corp. bond deal appears on track to return to the high-yield market pending shareholder approval of a C$2.05 per share increase in the stock price.

A source close to the deal cited syndicate officials as he told Prospect News that the acquisition, as well as the capital markets deals that will finance it, appears likely to return.

Deutsche Bank Securities, UBS Investment Bank and Scotia Capital are leading the high-yield deal.

The bonds, as well a new credit facility, were withdrawn earlier this week when shareholders turned down Masonite's previous offer.

In a Friday news release, Masonite announced that it amended its agreement with Stile Acquisition Corp., an affiliate of Kohlberg Kravis Roberts & Co., to provide for an increase to C$42.25 per Masonite share, up from C$40.20.

Meanwhile, the shareholders meeting at which the new offer will be presented for approval was moved to March 31. The meeting had previously been scheduled for Feb. 18.

However, Prospect News learned Friday that Greystone, one of Masonite's biggest shareholders with about 8% of the stock, has specified that it will support the new bid.

The source said that it has become customary on today's leveraged buyout landscape for shareholders to withhold approval until they are certain they have extracted the optimal terms, regardless of the advice of corporate administrators and company directors.

"There are so many hedge funds and other savvy investors that people are really pushing back on terms and deals," said the source. "It happens all of the time. Coors-Molson was an example where you had a couple of big hedge funds digging in their heels, holding out for more money.

"The premiums in a lot of these deals these days are not that big. So some people are holding out for dividends and premiums. Everyone is being a little more savvy about it. And they are using their leverage a little more."

Before they withdrew the deal, Masonite was in-market with $825 million of bonds in two tranches (B-), including $300 million of senior unsecured floating-rate notes due 2013 and $525 million of senior subordinated notes due 2015.

The source specified that it is too early to tell if Masonite will return with an identical deal, however the company figures to return with funding requirements that are similar to those that prevailed last week when the bond and bank deals were withdrawn.

Masonite was also expected to obtain a $1.525 billion credit facility comprised of a $1.175 billion eight-year senior secured term loan and $350 million equivalent six-year multi-currency revolving credit facility.

Masonite is a Mississauga, Ont.-based building products company.

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