SECURITIES & EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
SCHEDULE 13D*
(Rule 13d-101)
INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT TO
13d-1(a) AND AMENDMENTS THERETO FILED PURSUANT TO 13d-2(a)
MASONITE INTERNATIONAL CORPORATION
(Name of Issuer)
Common Stock
(Title of Class of Securities)
575384102
(CUSIP Number)
Ricky C. Sandler
Eminence Capital LLC, 65 East 55th Street, 25th Floor,
New York, NY 10022 (212) 418-2100
(Name, address and telephone number of person
authorized to receive notices and communications)
February 1, 2005
(Date of event which requires filing of this statement)
If the filing person has previously filed a statement on Schedule 13G to
report the acquisition which is the subject of this Schedule 13D, and is filing
this schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the
following box [ ].
NOTE: Schedules filed in paper format shall include a signed original and
five copies of the schedule, including all exhibits. See Rule 13d-7 for other
parties to whom copies are to be sent.
(Continued on following pages)
(Page 1 of 19 Pages)
----------------
*The remainder of this cover page shall be filled out for a reporting
person's initial filing on this form with respect to the subject class of
securities, and for any subsequent amendment containing information which would
alter the disclosures provided in a prior cover page.
The information required in the remainder of this cover page shall not be
deemed to be "filed" for purposes of Section 18 of the Securities Exchange Act
of 1934 ("Act") or otherwise subject to the liabilities of that section of the
Act but shall be subject to all other provisions of the Act (however, see the
Notes).
CUSIP No. 575384102 13D Page 2 of 19 Pages
-----------------------------------------------------------------------------
(1) NAME OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS.
OF ABOVE PERSONS (ENTITIES ONLY)
Eminence Partners, LP
-----------------------------------------------------------------------------
(2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP **
(a) [X]
(b) [ ]
-----------------------------------------------------------------------------
(3) SEC USE ONLY
-----------------------------------------------------------------------------
(4) SOURCE OF FUNDS **
WC
-----------------------------------------------------------------------------
(5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS
REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) [ ]
-----------------------------------------------------------------------------
(6) CITIZENSHIP OR PLACE OF ORGANIZATION
New York
-----------------------------------------------------------------------------
NUMBER OF (7) SOLE VOTING POWER
-0-
SHARES --------------------------------------------------------------
BENEFICIALLY (8) SHARED VOTING POWER
1,549,973
OWNED BY --------------------------------------------------------------
EACH (9) SOLE DISPOSITIVE POWER
-0-
REPORTING --------------------------------------------------------------
PERSON WITH (10) SHARED DISPOSITIVE POWER
1,549,973
-----------------------------------------------------------------------------
(11) AGGREGATE AMOUNT BENEFICIALLY OWNED
BY EACH REPORTING PERSON
1,549,973
-----------------------------------------------------------------------------
(12) CHECK BOX IF THE AGGREGATE AMOUNT
IN ROW (11) EXCLUDES CERTAIN SHARES ** [ ]
-----------------------------------------------------------------------------
(13) PERCENT OF CLASS REPRESENTED
BY AMOUNT IN ROW (11)
2.8%
-----------------------------------------------------------------------------
(14) TYPE OF REPORTING PERSON **
PN
-----------------------------------------------------------------------------
** SEE INSTRUCTIONS BEFORE FILLING OUT!
CUSIP No. 575384102 13D Page 3 of 19 Pages
-----------------------------------------------------------------------------
(1) NAME OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS.
OF ABOVE PERSONS (ENTITIES ONLY)
Eminence Partners II, LP
-----------------------------------------------------------------------------
(2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP **
(a) [X]
(b) [ ]
-----------------------------------------------------------------------------
(3) SEC USE ONLY
-----------------------------------------------------------------------------
(4) SOURCE OF FUNDS **
WC
-----------------------------------------------------------------------------
(5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS
REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) [ ]
-----------------------------------------------------------------------------
(6) CITIZENSHIP OR PLACE OF ORGANIZATION
New York
-----------------------------------------------------------------------------
NUMBER OF (7) SOLE VOTING POWER
-0-
SHARES --------------------------------------------------------------
BENEFICIALLY (8) SHARED VOTING POWER
100,577
OWNED BY --------------------------------------------------------------
EACH (9) SOLE DISPOSITIVE POWER
-0-
REPORTING --------------------------------------------------------------
PERSON WITH (10) SHARED DISPOSITIVE POWER
100,577
-----------------------------------------------------------------------------
(11) AGGREGATE AMOUNT BENEFICIALLY OWNED
BY EACH REPORTING PERSON
100,577
-----------------------------------------------------------------------------
(12) CHECK BOX IF THE AGGREGATE AMOUNT
IN ROW (11) EXCLUDES CERTAIN SHARES ** [ ]
-----------------------------------------------------------------------------
(13) PERCENT OF CLASS REPRESENTED
BY AMOUNT IN ROW (11)
0.2%
-----------------------------------------------------------------------------
(14) TYPE OF REPORTING PERSON **
PN
-----------------------------------------------------------------------------
** SEE INSTRUCTIONS BEFORE FILLING OUT!
CUSIP No. 575384102 13D Page 4 of 19 Pages
-----------------------------------------------------------------------------
(1) NAME OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS.
OF ABOVE PERSONS (ENTITIES ONLY)
Eminence GP, LLC
-----------------------------------------------------------------------------
(2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP **
(a) [X]
(b) [ ]
-----------------------------------------------------------------------------
(3) SEC USE ONLY
-----------------------------------------------------------------------------
(4) SOURCE OF FUNDS **
WC
-----------------------------------------------------------------------------
(5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS
REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) [ ]
-----------------------------------------------------------------------------
(6) CITIZENSHIP OR PLACE OF ORGANIZATION
New York
-----------------------------------------------------------------------------
NUMBER OF (7) SOLE VOTING POWER
-0-
SHARES --------------------------------------------------------------
BENEFICIALLY (8) SHARED VOTING POWER
1,650,550
OWNED BY --------------------------------------------------------------
EACH (9) SOLE DISPOSITIVE POWER
-0-
REPORTING --------------------------------------------------------------
PERSON WITH (10) SHARED DISPOSITIVE POWER
1,650,550
-----------------------------------------------------------------------------
(11) AGGREGATE AMOUNT BENEFICIALLY OWNED
BY EACH REPORTING PERSON
1,650,550
-----------------------------------------------------------------------------
(12) CHECK BOX IF THE AGGREGATE AMOUNT
IN ROW (11) EXCLUDES CERTAIN SHARES ** [ ]
-----------------------------------------------------------------------------
(13) PERCENT OF CLASS REPRESENTED
BY AMOUNT IN ROW (11)
3.0%
-----------------------------------------------------------------------------
(14) TYPE OF REPORTING PERSON **
OO
-----------------------------------------------------------------------------
** SEE INSTRUCTIONS BEFORE FILLING OUT!
CUSIP No. 575384102 13D Page 5 of 19 Pages
-----------------------------------------------------------------------------
(1) NAME OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS.
OF ABOVE PERSONS (ENTITIES ONLY)
Eminence Capital, LLC
-----------------------------------------------------------------------------
(2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP **
(a) [X]
(b) [ ]
-----------------------------------------------------------------------------
(3) SEC USE ONLY
-----------------------------------------------------------------------------
(4) SOURCE OF FUNDS **
OO
-----------------------------------------------------------------------------
(5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS
REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) [ ]
-----------------------------------------------------------------------------
(6) CITIZENSHIP OR PLACE OF ORGANIZATION
New York
-----------------------------------------------------------------------------
NUMBER OF (7) SOLE VOTING POWER
-0-
SHARES --------------------------------------------------------------
BENEFICIALLY (8) SHARED VOTING POWER
3,000,000
OWNED BY --------------------------------------------------------------
EACH (9) SOLE DISPOSITIVE POWER
-0-
REPORTING --------------------------------------------------------------
PERSON WITH (10) SHARED DISPOSITIVE POWER
3,000,000
-----------------------------------------------------------------------------
(11) AGGREGATE AMOUNT BENEFICIALLY OWNED
BY EACH REPORTING PERSON
3,000,000
-----------------------------------------------------------------------------
(12) CHECK BOX IF THE AGGREGATE AMOUNT
IN ROW (11) EXCLUDES CERTAIN SHARES ** [ ]
-----------------------------------------------------------------------------
(13) PERCENT OF CLASS REPRESENTED
BY AMOUNT IN ROW (11)
5.5%
-----------------------------------------------------------------------------
(14) TYPE OF REPORTING PERSON **
IA
-----------------------------------------------------------------------------
** SEE INSTRUCTIONS BEFORE FILLING OUT!
CUSIP No. 575384102 13D Page 6 of 19 Pages
-----------------------------------------------------------------------------
(1) NAME OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS.
OF ABOVE PERSONS (ENTITIES ONLY)
Ricky C. Sandler
-----------------------------------------------------------------------------
(2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP **
(a) [X]
(b) [ ]
-----------------------------------------------------------------------------
(3) SEC USE ONLY
-----------------------------------------------------------------------------
(4) SOURCE OF FUNDS **
OO
-----------------------------------------------------------------------------
(5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS
REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) [ ]
-----------------------------------------------------------------------------
(6) CITIZENSHIP OR PLACE OF ORGANIZATION
United States
-----------------------------------------------------------------------------
NUMBER OF (7) SOLE VOTING POWER
1,850
SHARES --------------------------------------------------------------
BENEFICIALLY (8) SHARED VOTING POWER
3,000,000
OWNED BY --------------------------------------------------------------
EACH (9) SOLE DISPOSITIVE POWER
1,850
REPORTING --------------------------------------------------------------
PERSON WITH (10) SHARED DISPOSITIVE POWER
3,000,000
-----------------------------------------------------------------------------
(11) AGGREGATE AMOUNT BENEFICIALLY OWNED
BY EACH REPORTING PERSON
3,001,850
-----------------------------------------------------------------------------
(12) CHECK BOX IF THE AGGREGATE AMOUNT
IN ROW (11) EXCLUDES CERTAIN SHARES ** [ ]
-----------------------------------------------------------------------------
(13) PERCENT OF CLASS REPRESENTED
BY AMOUNT IN ROW (11)
5.5%
-----------------------------------------------------------------------------
(14) TYPE OF REPORTING PERSON **
IN
-----------------------------------------------------------------------------
** SEE INSTRUCTIONS BEFORE FILLING OUT!
CUSIP No. 575384102 13D Page 7 of 19 Pages
Item 1. Security and Issuer.
This Schedule 13D relating to the common stock, no par value(the "Common
Stock") of Masonite International Corporation (the "Company"). The Company's
principal executive offices are located at 1600 Britannia Road, Mississauga,
Ontario, Canada L4W 2J2.
Item 2. Identity and Background.
(a) This statement is filed by:
(i) Eminence Partners, LP, a New York limited partnership ("Eminence
I"), with respect to the shares of Common Stock directly owned by
it;
(ii) Eminence Partners II, LP, a New York limited partnership
("Eminence II" and together, with Eminence I, the
"Partnerships"), with respect to the shares of Common Stock
directly owned by it;
(iii) Eminence GP, LLC, a New York limited liability company
("Eminence GP"), which serves as General Partner to the
Partnerships, with respect to the shares of Common Stock
directly owned by the Partnerships;
(iv) Eminence Capital, LLC, a New York limited liability company (the
"Investment Manager"), which serves as the investment manager to
the Partnerships and Eminence Fund, Ltd., a company organized
under the laws of the Cayman Islands ("Eminence Offshore"), with
respect to the shares of Common Stock directly owned by the
Partnerships and Eminence Offshore; and
(v) Ricky C. Sandler, with respect to the shares of Common Stock
directly owned by the Partnerships, Eminence Offshore and certain
other accounts.
The foregoing persons are hereinafter sometimes collectively
referred to as the "Reporting Persons." Any disclosures herein with respect to
persons other than the Reporting Persons are made on information and belief
after making inquiry to the appropriate party.
(b) The address of the principal business and principal office of the
Partnerships, Eminence GP and the Investment Manager is 65 East 55th
Street, 25th Floor, New York, NY 10022. The business address of Mr.
Sandler is 65 East 55th Street, 25th Floor, New York, NY 10022.
(c) The principal business of the Partnerships is serving as private
investment limited partnerships. The principal business of Eminence GP
is serving as a general partner to the Partnerships. The principal
business of the Investment Manager is that of an investment manager
engaging in the purchase and sale of securities on behalf of clients.
Mr. Sandler serves as the Managing Member of Eminence GP and the
Investment Manager.
CUSIP No. 575384102 13D Page 8 of 19 Pages
(d) None of the Reporting Persons has, during the last five years, been
convicted in a criminal proceeding (excluding traffic violations or
similar misdemeanors).
(e) None of the Reporting Persons has, during the last five years, been a
party to a civil proceeding of a judicial or administrative body of
competent jurisdiction and, as a result of such proceeding, was, or is
subject to, a judgment, decree or final order enjoining future
violations of, or prohibiting or mandating activities subject to,
Federal or State securities laws or finding any violation with respect
to such laws.
(f) The Partnerships are limited partnerships organized under the laws of
the State of New York. Each of Eminence GP and the Investment Manager
is a limited liability company organized under the laws of the State
of New York. Mr. Sandler is a United States citizen.
Item 3. Source and Amount of Funds and Other Consideration.
The net investment cost (including commissions, if any) of the shares of
Common Stock directly owned by the Partnerships, Eminence Offshore and the
certain other accounts is approximately $86,300,000. Mr. Sandler, Eminence GP
and the Investment Manager do not directly own any shares of Common Stock.
Item 4. Purpose of the Transaction.
The purpose of the acquisition of the shares of Common Stock by the
Reporting Persons is for investment, and the purchases of the shares of Common
Stock by the Reporting Persons were made in the ordinary course of business and
were not made for the purpose of acquiring control of the Company. Although the
acquisition of the shares of Common Stock by the Reporting Persons is for
investment purposes, the Reporting Persons have had discussions with management
in an effort to maximize long-term value for shareholders. Each of the Reporting
Persons may make further purchases of shares of Common Stock from time to time
and may dispose of any or all of the shares of Common Stock held by him or it at
any time. The Reporting Persons object to, and have voted their proxy against,
the proposed sale of Masonite to KKR (the "Transaction"). The Reporting Persons
have expressed their concerns as indicated in the attached letter addressed to
the Board of Directors of Masonite and presented to them on January 26, 2005. In
the event the Transaction is voted down at the February 18, 2005 special meeting
of shareholders the Reporting Persons intend to continue discussions with the
management of Masonite regarding how they may maximize the long-term value for
shareholders. Each of the Reporting Persons may, at any time and from time to
time, review or reconsider his or its position and formulate plans or proposals
with respect thereto.
CUSIP No. 575384102 13D Page 9 of 19 Pages
Item 5. Interest in Securities of the Issuer.
A. Eminence Partners, LP
(a) Aggregate number of shares beneficially owned: 1,549,973
Percentage: 2.8% The percentages used herein and in the
rest of Item 5 are calculated based upon 54,796,531 shares of Common Stock
issued and outstanding as of January 17, 2005 as reflected in the Company's
Notice and Management Proxy Circular dated January 18, 2005.
(b) 1. Sole power to vote or direct vote: -0-
2. Shared power to vote or direct vote: 1,549,973
3. Sole power to dispose or direct the disposition: -0-
4. Shared power to dispose or direct the disposition: 1,549,973
(c) The trading dates, number of shares of Common Stock purchased
or sold and the price per share for all transactions by Eminence I in the Common
Stock within the last sixty days, which were all in the open market, are set
forth in Schedule A and are incorporated by reference.
(d) Eminence GP, the General Partner of Eminence I, has the power to
direct the affairs of Eminence I, including decisions respecting the receipt of
dividends from, and the disposition of the proceeds from the sale of, the shares
of Common Stock. Mr. Sandler is the Managing Member of Eminence GP and in that
capacity directs its operations.
(e) Not applicable.
B. Eminence Partners II, LP
(a) Aggregate number of shares beneficially owned: 100,577
Percentage: 0.2%
(b) 1. Sole power to vote or direct vote: -0-
2. Shared power to vote or direct vote: 100,577
3. Sole power to dispose or direct the disposition: -0-
4. Shared power to dispose or direct the disposition: 100,577
(c) The trading dates, number of shares of Common Stock purchased
or sold and the price per share for all transactions by Eminence II in the
Common Stock within the last sixty days, which were all in the open market, are
set forth in Schedule B and are incorporated by reference.
(d) Eminence GP, the General Partner of Eminence II, has the power
to direct the affairs of Eminence II, including decisions respecting the receipt
of dividends from, and the disposition of the proceeds from the sale of, the
shares of Common Stock. Mr. Sandler is the Managing Member of Eminence GP, and
in that capacity directs its operations.
(e) Not applicable.
CUSIP No. 575384102 13D Page 10 of 19 Pages
C. Eminence GP, LLC
(a) Aggregate number of shares beneficially owned: 1,650,550
Percentage: 3.0%
(b) 1. Sole power to vote or direct vote: -0-
2. Shared power to vote or direct vote: 1,650,550
3. Sole power to dispose or direct the disposition: -0-
4. Shared power to dispose or direct the disposition: 1,650,550
(c) Eminence GP did not enter into any transactions in the Common
Stock of the Company within the last sixty days. The trading dates,
number of shares of Common Stock purchased or sold and the price per
share for all transactions in the Common Stock within the last sixty
days on behalf of Eminence I and Eminence II, which were all in the
open market, are set forth in Schedules A and B, respectively, and
are incorporated by reference.
(d) Not applicable.
(e) Not applicable.
D. Eminence Capital, LLC
(a) Aggregate number of shares beneficially owned: 3,000,000
Percentage: 5.5%
(b) 1. Sole power to vote or direct vote: -0-
2. Shared power to vote or direct vote: 3,000,000
3. Sole power to dispose or direct the disposition: -0-
4. Shared power to dispose or direct the disposition: 3,000,000
(c) The Investment Manager did not enter into any transactions in
the Common Stock of the Company within the last sixty days. The
trading dates, number of shares of Common Stock purchased or
sold and the price per share for all transactions in the Common
Stock within the last sixty days on behalf of Eminence I,
Eminence II and Eminence Offshore, which were all in the open
market, are set forth in Schedules A, B and C, respectively, and
are incorporated by reference.
(d) Each of the clients of the Investment Manager has the power to
direct the receipt of dividends from or the proceeds of the sale
of such shares.
(e) Not applicable.
E. Ricky C. Sandler
(a) Aggregate number of shares beneficially owned: 3,001,850
Percentage: 5.5%
(b) 1. Sole power to vote or direct vote: 1,850
2. Shared power to vote or direct vote: 3,000,000
3. Sole power to dispose or direct the disposition: 1,850
4. Shared power to dispose or direct the disposition: 3,000,000
(c) Mr. Sandler did not enter into any transactions in the Common
Stock of the Company within the last sixty days. The trading dates, number of
shares of Common Stock purchased or sold and the price per share for all
transactions in the Common Stock within the last sixty days on behalf of
Eminence I, Eminence II, Eminence Offshore and the other accounts, which were
all in the open market, are set forth in Schedules A, B, C and D, respectively,
and are incorporated by reference.
(d) Not applicable.
(e) Not applicable.
CUSIP No. 575384102 13D Page 11 of 19 Pages
SIGNATURES
After reasonable inquiry and to the best of our knowledge and belief, the
undersigned certifies that the information set forth in this statement is true,
complete and correct.
DATED: February 11, 2005
/s/ Ricky C. Sandler
---------------------
Ricky C. Sandler, individually, and as
Managing Member of
Eminence Capital, LLC,
Investment Manager of
Eminence Partners, LP,
Eminence Partners II, LP and
Eminence Fund, Ltd., and as
Managing Member of
Eminence GP, LLC,
General Partner of
Eminence Partners, LP and
Eminence Partners II, LP
CUSIP No. 575384102 13D Page 12 of 19 Pages
Schedule A
Eminence Partners, LP
Price Per Share
Date of Number of Shares (including commissions,
Transaction Purchased/(Sold) if any)
12/23/04 52,890 $32.75
12/27/04 (51,690) $33.45
12/31/04 (64,620) $34.48
01/04/05 (233,280) $33.64
01/20/05 71,850 $32.96
01/31/05 199,480 $32.85
02/01/05 258,340 $32.69
CUSIP No. 575384102 13D Page 13 of 19 Pages
Schedule B
Eminence Partners II, LP
Price Per Share
Date of Number of Shares (including commissions,
Transaction Purchased/(Sold) if any)
12/23/04 3,740 $32.75
12/27/04 (3,760) $33.45
12/31/04 (4,700) $34.48
01/04/05 24,900) $33.88
01/20/05 4,650 $32.96
01/31/05 12,950 $32.85
02/01/05 16,760 $32.69
CUSIP No. 575384102 13D Page 14 of 19 Pages
Schedule C
Eminence Capital, LLC
Price Per Share
Date of Number of Shares (including commissions,
Transaction Client Purchased/(Sold) if any)
12/23/04 Eminence Offshore 43,370 $32.75
12/27/04 Eminence Offshore (44,550) $33.45
12/31/04 Eminence Offshore (55,680) $34.48
01/04/05 Eminence Offshore 10,000 $34.28
01/04/05 Eminence Offshore (201,820) $33.64
01/20/05 Eminence Offshore 62,500 $32.96
01/31/05 Eminence Offshore 173,570 $32.85
02/01/05 Eminence Offshore 224,900 $32.69
CUSIP No. 575384102 13D Page 15 of 19 Pages
Schedule D
Other Accounts
Price Per Share
Date of Number of Shares (including commissions,
Transaction Purchased/(Sold) if any)
02/08/05 200 $32.66
CUSIP No. 575384102 13D Page 16 of 19 Pages
EXHIBIT 1
JOINT ACQUISITION STATEMENT
PURSUANT TO RULE 13D-1(k)1
The undersigned acknowledge and agree that the foregoing statement on Schedule
13D is filed on behalf of each of the undersigned and that all subsequent
amendments to this statement on Schedule 13D shall be filed on behalf of each of
the undersigned without the necessity of filing additional joint acquisition
statements. The undersigned acknowledge that each shall be responsible for the
timely filing of such amendments and for the completeness and accuracy of the
information concerning him or it contained therein, but shall not be responsible
for the completeness and accuracy of the information concerning the others,
except to the extent that he or it knows or has reason to believe that such
information is inaccurate.
DATED: February 11, 2005
/s/ Ricky C. Sandler
---------------------
Ricky C. Sandler, individually, and as
Managing Member of
Eminence Capital, LLC,
Investment Manager of
Eminence Partners, LP,
Eminence Partners II, LP and
Eminence Fund, Ltd., and as
Managing Member of
Eminence GP, LLC,
General Partner of
Eminence Partners, LP and
Eminence Partners II, LP
CUSIP No. 575384102 13D Page 17 of 19 Pages
EXHIBIT 2
Press Release
New York, NY January 27, 2005
Eminence Capital, LLC, New York, NY is issuing the following press release. This
press release represents the entire content of a letter that was presented by
Eminence Capital, LLC to the Board of Directors of Masonite International
Corporation on January 26, 2005:
As you may know, Eminence Capital LLC ("Eminence Capital") is a significant
shareholder of Masonite International Corporation (the "Company"), owning
approximately 3.8% of its outstanding common shares.
We are writing to you because we strongly oppose the announced leveraged buyout
of Masonite by Stile Acquisition Corp., an affiliate of Kohlberg Kravis Roberts
& Co. ("KKR"). We think the company is worth far more than the C$40.20 per share
purchase price. Also, based on our review of the proxy, we believe that the
Special Committee of the Board of Directors, in reaching its conclusion that the
offer is substantively fair to the shareholders of Masonite, relied upon factors
and assumptions that were materially inconsistent with management's recent
comments to shareholders about those same factors and assumptions.
We believe Masonite ("MHM") is worth at least C$50 per share. This can be
supported by the same valuation techniques used in the analysis your investment
banker prepared for the Special Committee of the Board of Directors. Our
analysis, however, points out several inconsistencies and flaws we see in the
analysis performed by the banker.
These inconsistencies and flaws are as follows:
1) Management of the Company supplied your banker with financial
projections that were very inconsistent with statements your CEO Phil
Orsino and Executive VP Larry Repar made to shareholders of the
Company as recently as October 20, 2004. Management's projections used
by your banker appear to assume an internal revenue growth rate of 1%
- 3% compared to the 7% - 10% growth rate management discussed on its
July and October earnings calls. [SEE ORGANIC GROWTH DISCUSSION BELOW]
We performed LBO and DCF analyses using the assumptions presented in
the proxy, however, assuming an internal growth rate of 7% (the
low-end of management's range) and we calculate the mid-points of fair
value at C$48 per share in the LBO analysis and C$53 per share in the
DCF analysis. These values are C$7 - C$10 per share higher than the
values (mid-points) your banker derived in its analysis.
2) Your banker applied a 20% to 35% discount to the comparable company
multiple when valuing MHM because MHM has historically traded at a
discount to its US peers. We believe that based on MHM's leading
market position, solid internal growth rate and strong cash flow, the
company is worth at least a comparable multiple to its US peers. Using
the same EPS figure as your banker used in its analysis,
CUSIP No. 575384102 13D Page 18 of 19 Pages
US$2.71 per share, we calculate a fair comparable company value of
C$48.00 per share. This assumes no control premium though one is
clearly justified.
3) Your banker used an LTM EBITDA figure that was not adjusted for the
full-year effect of acquisitions that MHM consummated in the last nine
months. When we value MHM's LTM EBITDA, adjusted for acquisitions, at
the same multiple as the peer group presented in the proxy (no
discount applied) we arrive at a value of C$46.00 per share, again
assuming no control premium. This value is C$13.50 per share higher
than the mid-point price in your banker's analysis.
We find it disconcerting that your banker (the Special Committee's financial
advisor) was supplied financial projections by management that were
significantly below the very targets management spoke about on its conference
calls with investors as recently as October 20, 2004. These projections were
also well below the projections management originally supplied to KKR, also in
October 2004. Specifically, the projections supplied to the investment bankers
for purposes of determining "Fairness" incorporate internal revenue growth
assumptions far below levels that management publicly spoke about on its two
most recent earnings conference calls.
Below we have provided the inconsistencies between the organic revenue growth
rate assumptions provided by the Company to its banker and what was said to the
public on the July 19th, 2004 and October 20th, 2004 conference calls.
ORGANIC GROWTH DISCUSSION:
The projections supplied to your banker for the purpose of their fairness
opinion assumed a compounded annual growth rate ("CAGR") in total revenues from
2005 to 2009 of 6.3%. This growth rate included revenue added through US$100
million per year of acquisition spending. Backing out these acquisitions, this
forecast implies internal revenue growth of 1% to 3%, far below management's
recent projections of 7% to 10%.
On the July 19, 2004 conference call with investors1, your CEO Phil Orsino
stated:
"Well, you know, what we targeted and what we talked about was that over
the next three to five years that we could achieve growth of 7 to 10% top
line. And we are still very, very confident in those target ranges."
On the October 20, 2004 conference call, management continued to support this
target growth rate:
QUESTION FROM SELL SIDE ANALYST: "What's the outlook for organic growth in
your assessment right now for sales growth in 2005? Can we do
double-digit-plus?"
___________________________
(1) All quotations per Street Events transcripts.
CUSIP No. 575384102 13D Page 19 of 19 Pages
ANSWER FROM LARRY REPAR: "We are maintaining the targets that we have
discussed throughout the year - organic growth ranging between 7 and 10
percent, and we are going to maintain that target for 2005."
ANSWER FROM PHILIP ORSINO: "I mean, if economic conditions continue to be
similar to what they are at this point in time, then obviously in the same
way that we broke through that range, so far this year we could continue
to break through that range going into next year as well."
Given the above, we believe that the financial projections and valuation
multiples used to evaluate the fairness of KKR's offer were significantly
understated. We do not agree that the current offer reflects a fair price for
the Company and believe the Company is worth at least C$50 per share based on a
number of valuation parameters. Moreover, we are troubled by the sudden change
in management's outlook for the business and would note that as participants in
the transaction, management has a conflict of interest.
We intend to vote against the transaction as currently configured. Should we and
other shareholders vote this transaction down, we strongly urge the Board of
Directors of the Company to take one of the following actions:
1) Execute management's recently stated plan without any further disruptions
and accelerate the Company's recently announced share repurchase program,
possibly through a Dutch Auction; and / or
2) Implement a leverage recapitalization of the Company and pay a significant
special dividend to current shareholders.
We have always been a supportive shareholder of the Company and believe that the
Company is a well-managed business with favorable growth prospects. We are
disappointed by the value that is being offered by KKR and the management team
and find it disappointing in this day and age that you have recommended that KKR
and management insiders acquire the Company, and its upside potential, for an
inadequate price. We also believe that other significant shareholders share our
concerns about the transaction.
END OF LETTER
For further information you can contact Ricky C. Sandler, Managing Member of
Eminence Capital, LLC at 212-418-2100.