Behind the Quanex-Edgetech deal

Sahely Mukerji, Glass Magazine
February 1, 2011
COMMERCIAL, RETAIL, FABRICATION

Mike Hovan

David Petratis

Officials at Quanex Building Products Corp., Houston, signed a definitive agreement with Lauren International, New Philadelphia, Ohio, to acquire Edgetech I.G. Inc., Cambridge, Ohio, for $107 million in an all-cash transaction, according to a Jan. 31 release. Closing will take place immediately upon conclusion of applicable governmental regulatory approval. The acquisition is expected to be accretive in year one, and additional information will be disclosed at closing.

Sahely Mukerji, senior editor, Glass Magazine, talked to Mike Hovan, president, Edgetech, and David Petratis, chairman and CEO, Quanex, about the acquisition. Below are excerpts from the interview.

Tell me more about the transaction. When do you expect to close? Will any of the three Edgetech facilities be affected? What about the employees?
MH:  With any merger or acquisition within the same industry, the government will do the appropriate due diligence.
DP: The government will look over the merger and we’re confident it will go through. There will be changes, but we believe in Edgetech’s growth.
MH: Part of why this acquisition makes sense is that there are many opportunities for growth and opportunities for how we can best serve our respective customers.

Mike, what made Quanex’s offer attractive?
MH: We had a number of criteria. Quanex is a company that understands the fenestration market. For us, the fit between the two companies, including the culture and core values, are in alignment. We knew Edgetech had many opportunities to grow in the global marketplace. As part of Lauren International, we worked very well together, but I think we needed a larger parent to help us achieve the next level of growth. Lauren realized that as well and at some point, it had to let go.  Quanex was the right choice to help us meet our objectives.

David, given the fact that Quanex owned Truseal, what made Edgetech—with its competing technology—so attractive?
DP: We believe that the banner of energy efficiency needs to be pushed and developed. Both Edgetech and Truseal excel in that arena. Bringing those minds together will create a positive and new thinking that the industry needs to provide homeowners and commercial building owners more energy efficient solutions.

What about international capabilities?
DP: Edgetech is well-positioned internationally. It fills a growth need for Quanex.  We’re investing to build our commercial solar adhesives capabilities internationally, and adding Edgetech’s capabilities will move things faster. Edgetech’s development and manufacturing capabilities in the UK are mature, and the new facility in Germany is a positive step. Edgetech complements the growth and aspiration of Quanex.

Could you discuss specific technologies?
DP: When you bring great minds together, you can push the energy-efficiency envelope.  For instance, our fenestration system Imperi Clad was a result of our Mikron and HomeShield technologies coming together to create an industry-rated door system. Another great example is how our Mikron and Truseal businesses collaborated to design the EnergyCore window profile system. Bringing minds and technologies together to solve issues for more energy-efficient solutions for customers is what we do best.

What other products will you work on besides spacers?
MH: Edgetech’s strengths are in IG. Quanex brings to the table a group of people that we can now collaborate with to bring new and innovative products to market. The more we get these people in a room talking, the better it is for the industry. Good people and good ideas will bring new products.
DP: Edgetech brings a different technology than Truseal, and each company brings their respective customers. Our technical people will get involved, work together, and grow together.

Is there a place in the market for both Duraseal and Super Spacer products long term? Are they complementary technologies? Or will Quanex be looking to bring the best of both together?
DP: There’s a role for both and our respective customers have validated that.
MH: I would agree. The opportunities to bring our collective customer base together will create new products in the field of IG and fenestration in general.

Will customers of either Edgetech or Truseal see any immediate changes?
DP: Internally and externally, they should expect the companies to embrace each other. There will be no immediate changes, but companies do evolve as they grow. Neither Edgetech nor Quanex are today what they were when they each started.
MH: We’ll continue to offer the best. We’ll continue to serve our customer base, and now, an extended customer base. We have a justified reputation for exemplary service in the industry and, where we can, we’ll improve on that.
DP: Together we will be better at designing energy-efficient window and door components and systems for the benefit of our customers.

Both Truseal and Edgetech have traditionally had strong marketing programs to support manufacturers using their products. How do you foresee those changing
MH: Our intent is to help our customers be successful. We’ll have added resources to enhance that. Whatever we can do to make our customers successful, we’ll do. Marketing is only one part of that service offering.
DP: A year ago we talked to the market about Project Nexus, which brought together our HomeShield, Mikron and Truseal technologies. If Edgetech can help us build on that, working together on systems and products that add value in a blended way, we can help our customers be more successful. We believe fenestration customers should be able to use component solutions and energy efficiency to advance their businesses. This acquisition will allow them to do so.
MH: Together we’re better. That’s really the message that we have moving forward.  Our ability to service our customers is improved.  We can offer our employees greater opportunities.   It’s one of those rare instances that is positive from all aspects.