Onex Corp. is investing $675-million (U.S.) in a door and window maker, a deal that's largely a bet on the recovery of the U.S. housing market.
The Toronto-based investment firm is buying a minority interest in Jeld-Wen Holding Inc., a company created in 1960 when the Wendt family opened a small plant in Oregon with 15 employees. It now has about 20,000 employees in more than 25 countries, and annual sales of more than $3-billion.
Jeld-Wen's doors and windows are primarily used in the residential market, and about half of its sales are in North America, with Europe being its next largest market. As such, its fortunes are closely tied to construction in the U.S. housing market.
Now, with housing starts south of the border at their lowest levels in decades, Onex is hoping to ride an upturn in the market when the demand for new housing bounces back.
"We believe that Jeld-Wen's competitive position and well-known brands in markets around the world position the company very well to take advantage of the eventual recovery in global housing markets," said Onex managing director Anthony Munk.
Onex has been taking a look at this sector for a while. It formed a partnership with Philip Orsino, a founder and former chief executive officer of Masonite International, and is keeping its eye on the building products sector. Mr. Orsino and Mr. Munk will both sit on Jeld-Wen's board.
In 2008, Onex made a smaller investment in Anaheim, Calif.-based RSI Home Products Inc., which makes kitchen and bathroom cabinets.
The biggest stake in Jeld-Wen, which is based in Klamath Falls, Ore., will continue to be held by the Wendt family, employees and other existing shareholders.
Onex's investment in the company will be made by its flagship private equity fund, Onex Partners III, and Onex's share as a limited partner in the fund will be $120-million.
The investment will be made by way of $475-million of convertible preferred stock, representing a 39-per-cent ownership stake, and then a $200-million convertible note that can be redeemed within 18 months from the sale of some of Jeld-Wen's non-core assets.