In a deal expected to open doors for both companies, Fortune Brands snapped up privately held Therma-Tru in November, paying $925 million for the Maumee, Ohio-based door manufacturer. Although slightly pricey compared with other Fortune buys, according to Credit Suisse First Boston analyst Ivy Zelman, the transaction makes sense for publicly traded Fortune, which expects the deal to boost earnings per share by 15 cents in the first year.
The buy makes strategic sense, too. Therma-Tru controls 25 percent of the entry-door market, giving Fortune's $3 billion Home & Hardware business an immediate and formidable presence in doors, which Zelman says is a somewhat fragmented market. "This is a category where brands are important to the consumer and to the trade," Fortune CEO Norm Wesley told analysts during a conference call. For Therma-Tru, the deal means getting the capital to continue growing its $400 million business. As a private company, "we risked, in my opinion, falling into the middle at some point," explains David K. Welles Jr., who stepped down as Therma-Tru chairman and is now serving as a consultant to the company. "I think Fortune gives us the best opportunity to retain our identity and autonomy."
The deal will allow the two companies to tap into new distribution channels. Therma-Tru has strong wholesale relationships, while Fortune is well connected with big builders and home centers, notably The Home Depot. If Fortune helps Therma-Tru expand its offerings and its distribution into home centers, Zelman says, the company could see significant market-share gains. "The remodel/replace market is one that both Fortune Brands and Therma-Tru want to increase participation in," acknowledges Bruce Carbonari, president and CEO of Fortune's Home & Hardware business, who says understanding the needs of end users--consumers, builders, and installers--will lead to new products and services for Therma-Tru and Fortune.