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Masco's Milgard Sale in Line With Portfolio Reshaping Efforts

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Masco Corporation (MAS - Free Report) remains engaged in acquisitions and divestitures of underperforming businesses to focus on core areas, in a bid to accelerate growth and improve shareholder value. This is evident from the company’s recent deal to offload Milgard Windows.

Masco recently signed an agreement to divest Milgard Windows and Doors to MI Windows and Doors for approximately $725 million. The terms of the deal, which is expected to close in fourth-quarter 2019 and subject to customary closing conditions, are not yet disclosed.

Earlier in March 2019, Masco announced that it will undertake "strategic alternatives" for cabinetry and window businesses. Eventually, in June, the company concluded the strategic review of cabinetry and windows businesses, and revealed its aim of pursuing the sale of these businesses that include well-known brands such as Merillat, KraftMaid and Milgard.

The divestitures of cabinetry and window businesses are expected to be completed by the end of first-quarter 2020. We view this announcement to be positive for the company as it will remove cyclicality and lower-margin businesses. This move will also drive liquidity, helping the company to strengthen the product portfolio and boost better-performing businesses.

Post the competition of the transactions, Masco — which shares space in the Zacks Building Products – Miscellaneous industry with Armstrong World Industries, Inc. (AWI - Free Report) , Owens Corning (OC - Free Report) and Louisiana-Pacific Corporation (LPX - Free Report) — aims to focus on the repair and remodel segment of the housing market.

Over the past five years, the company has been pursuing strategic alternatives such as growing exposure in the housing market’s repair and remodel segment in order to reduce cyclicality. The sale of cabinetry and window businesses will mark Masco’s completion of the process of reducing exposure in the new construction segment of the market. This will position it to focus on less cyclical Plumbing Products and Decorative Architectural Products businesses, going forward.

Notably, in the last reported quarter, Masco’s Cabinetry Products, and Windows and Other Specialty Products segments reported combined net sales of $436 million (down from the year-ago sales owing to lower volume).

Post the completion of the divestments, Masco's portfolio will comprise Behr paint, Delta and Hansgrohe faucets, bath and shower fixtures, Kichler decorative and outdoor lighting, and HotSpring spas.

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