Major Huttig shareholder objects to acquisition offer
One of Huttig Building Product’s largest shareholders is not satisfied with the latest acquisition offer from investment firm Mill Road Capital.
Seattle-based investment firm 22NW, LP owns about 7.9% of Huttig’s outstanding shares and issued a letter to the building product distributor’s board of directors saying the proposed offer of $4 per share is too low.
Last week Mill Road Capital increased its offer price to $4 per share after previously offering $2.75 per share in August. The latest price is a 142% premium over Huttig’s closing stock price of $1.65 on Aug. 6.
Huttig stock prices closed at $3.34 per share on Oct. 22 and reached a monthly high of $3.51 per share on Oct. 16. The latter price followed the news of Mill Road Capital’s increased offer.
Mill Road, which is offering cash to acquire Huttig, is a larger shareholder than 22NW, LP and owns about 8.1% of Huttig’s shares.
In a letter to Huttig’s board, 22NW, LP President Aron English, said the offer undervalues the financial progress Huttig has made in recent years along with the potential for its Huttig Grip fasteners business.
“Our diligence on Huttig has revealed that while the company had some initial logistical difficulties and disruptions with the expansion of its fasteners business, a majority of the problems had been resolved by 2019, and the Huttig Grip brand was gaining significant traction prior to the COVID-19 pandemic,” English said in the letter.
In its most recent financial report, Huttig posted a net income of $1.6 million for the second quarter compared to a net loss of $10.3 million for the same period a year ago. Sales for the distributor fell more than 12% in the second quarter, however. The company will release its third quarter results on Oct. 29, following the close of the stock market.
22NW, LP said there is room for growth at Huttig, especially within its fasteners brand, but the company has been hindered by the pandemic.
“We believe that the Huttig Grip brand of fasteners will continue to successfully expand, resulting in significant revenues and EBITDA growth for the company, but that COVID-19 has obscured this progress and temporarily led to an unduly depressed share price,” English said.
Pointing to a strong housing climate and the latest surge in builder confidence, English also said that Huttig is poised to reach a share price of $9 and could even hit $12 in a bull market.
The full letter from English and 22NW, LP can be viewed here.
Based in St. Louis, Mo., Huttig serves 41 states through 25 distribution locations.