Publicly traded building materials distributor Huttig Building Products Inc. (NASDAQ: HBP), St. Louis, Missouri, on Thursday announced it has received an “unsolicited, non-binding, expression of interest from Mill Road Capital Management LLC and its affiliated funds, a private investment firm, to acquire all of the outstanding common stock of the company for $2.75 per share.”
The private equity firm made the bid last week. On Aug. 7, it sent a letter to Delbert Tanner, chairman of Huttig’s board of directors, that read, in part:
Mill Road Capital Management LLC and its affiliated funds (“Mill Road”) are pleased to present this proposal for the acquisition of Huttig Building Products, Inc. (“Huttig” or the “Company”). As you know, Mill Road is one of the largest shareholders of Huttig with ownership of 8.1% of the Company‘s outstanding shares. Since making our initial investment in Huttig in 2017, we have developed a deep appreciation of the Company and its CEO, Jon Vrabely.
Given our experience in the public markets, we recognize the inherent difficulties of creating value for shareholders as a public, micro-cap company. There is very little sell-side analyst coverage and minimal demand for micro-cap stocks. Institutional investors avoid stocks like Huttig; it is difficult to accumulate a position and any attempt to sell large blocks can materially depress the share price for months. As a result, microcaps often attract short-term shareholders who look for “quick wins” and actively dissuade management from making sensible investments in long-term value-creation. We hope that the Board of Directors finds this proposal compelling for the Company’s shareholders and we look forward to working with you in connection with a transaction.
Based on our review of publicly available information to date, Mill Road proposes to acquire 100% of the outstanding shares of the Company not already owned by Mill Road for $2.75 per share which represents a premium of 67% over today’s closing price. The purchase price would be payable in cash.
Huttig has retained a financial adviser and said it will “review the letter and determine the course of action it believes is in the best interests of its stockholders.”