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Headwaters (HW) To Buy Assets Of Kleer Lumber; To Sell 7.6M Shares

 December 17, 2012 07:38 AM
 


(By Balaseshan) Headwaters Inc. (NYSE: HW), a building products company, said it has agreed to buy the assets of cellular PVC trim board and moulding products maker Kleer Lumber Inc., and is offering 7.6 million common shares in a public offering.

The acquisition is expected to be immediately accretive to Headwaters' earnings per share. The acquisition will add a full range of cellular PVC products to Headwaters' Light Building Products offerings, including trim boards, millwork, sheet stock, paneling, and moulding, as well as the company's recently introduced decking and railing products.

Headwaters believes the demand for cellular PVC building products is growing due to the ability to cut, mill, shape, and install in the same manner as wood products, but with the added benefit of cellular PVC requiring significantly less maintenance than wood.

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Kleer Lumber's trim boards offer the TruEDGE feature, a proprietary and innovative technology that seals edges, improving trim board performance and appearance. Kleer Lumber's products are manufactured at its Westfield, Massachusetts manufacturing and research and development facility.

Headwaters plans to introduce Kleer Lumber's product offerings into its large, national distribution network, expanding its point of sale locations. In addition, Kleer Lumber primarily distributes its products into independent lumber yards and home improvement centers located in the Northeast and Mid-Atlantic states.

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Headwaters' increased access to this distribution channel for its existing products will expand Headwaters' already extensive light building products distribution network.

From 2009 to date, Kleer Lumber's sales increased at a compound annual growth rate of more than 18%, with sales of about $38 million for the twelve months ended October 31, 2012. This increase in sales growth reflects a combination of the introduction of new products and an increase in sales of existing products.

Headwaters' proposed acquisition of Kleer Lumber, which is targeted to close by December 31, 2012, is subject to customary closing conditions. Accordingly, Headwaters cannot be certain that the acquisition will close on this timeframe or at all.

In a separate release, Headwaters said it is offering 7.6 million shares of its common stock in a public offering. The underwriters will have a 30-day option to purchase up to an additional 1.14 million shares from Headwaters.

Headwaters expects to use the proceeds from the sale of the common stock to acquire the assets of Kleer Lumber, and for general corporate purposes. Deutsche Bank Securities and Stifel Nicolaus Weisel are acting as book-runners for the offering.

HW closed Friday's regular session down 0.82% at $7.29. The stock has been trading between $1.96 and $7.95 for the past 52 weeks.

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