Masonite International Corporation
Masonite International Corporation
1600 Britannia Road East
Mississauga, Ontario L4W 1J2
Telephone: (905) 670-6500
Toll Free: (800) 663-3667
Fax: (905) 670-6520
Web site: http://www.masonite.com
Incorporated: 1982 as Premdor, Inc.
Sales: $1.77 billion (2003)
Stock Exchanges: New York Toronto
Ticker Symbol: MHM
NAIC: 321999 All Other Miscellaneous Wood Product Manufacturing
Masonite International Corporation is a leading manufacturer of doors and door components, based in Mississauga, Canada. Approximately two-thirds of sales come from interior doors. All told, the company each day produces some 120,000 doors, which it sells to more than 50 countries. The North American market accounts for close to 85 percent of sales. Masonite sells to a variety of customers, including distributors, jobbers, big box home center chains, and wholesale and retail building supply dealers.
Appropriating the Masonite Name in 2002
Masonite International Corporation is the result of the 2001 acquisition of the Masonite business from International Paper by Premdor, Inc. Taking advantage of Masonite's brand recognition, Premdor assumed the name starting in 2002. The legacy of the Masonite name can be traced to engineer and inventor William H. Mason, who apprenticed under Thomas A. Edison. Mason married into a Wisconsin lumber family and became interested in finding a way to make commercial use of the mountains of wood chips cast off by milling operations. With timber becoming depleted, lumbermen were willing to back his efforts as a way to find a secondary use for their waste. Mason moved to Laurel, Mississippi, where his wife's family owned saw mills that could supply all the waste he needed for his experiments. He soon developed a way to extract turpentine from lumber, simultaneously reducing weight and improving quality, but his preoccupation was to convert wood chips into fibers that could in turn be used to make quality paper products. To make wood fibers, he fashioned a gun of sorts. Wood chips and water were packed into a steel tube, which was then sealed with a plug. After a blowtorch heated the tube, creating a tremendous amount of pressure, the plug was pulled, and the wood chips exploded into individual wood fibers.
Mason now turned his attention to making a salable product out of the fibers. To his disappointment, the fibers he produced did not make for very good paper, and so he began to think of making a lumber replacement that would be an improvement over plywood. He tried pressing the slurry produced from mixing wood fibers and water, at first using presses designed to make paper. The results were not satisfactory, leading Mason to try other presses. He had limited success in his efforts until chance intervened one day when he took a break from his experiments to have lunch. He was unaware that a pressure valve on his press was leaking, which allowed high-pressured steam to react with the fibers. Before going to lunch, he forgot to release the pressure on the press, and as a result the steam was allowed to interact with the fibers until he returned to the laboratory some time later. When he saw the smoldering press, he quickly released the steam, opened the press and was surprised to discover the fibers had turned into a hard, grainless particleboard. With further experimentation he was able to produce thin sheets of the materials, well suited for the construction industry. He named the new substance after himself, calling it Masonite.
Forming the Mason Fiber Company in 1924
Wisconsin and Laurel lumber companies funded Mason to establish the Mason Fiber Company in 1924; four years later it would adopt the Masonite Corporation name. In October 1925 construction was started on the company's first plant, located in Laurel, to produce insulation board and hardboard. It began operations in 1926. Mason continued to improve Masonite, creating attractive finishes and increasing the strength through a tempering process. With the advent of the Great Depression of the 1930s, Masonite thrived because of its cheap price, and because of its quality and strength it would remain a standard construction product even after the economy rebounded. Mason was awarded a string of patents connected to Masonite before his death in 1940.
Masonite licensed plants in Australia, Canada, Italy, and Sweden to produce its hardwood. In 1934 the company went public, becoming listed on the New York Stock Exchange, and a year later moved its headquarters from Laurel to Chicago. During the first half of the 1940s Masonite, like most businesses, concentrated on defense contracts; its materials were used to make airplane dies, trailers, field kitchens, barracks, shell carrying cases, and a myriad of other uses. In the decade following the war, Masonite looked to broaden the uses of hardboard, which gradually became an acceptable raw material for making toys, play pens, television cabinets, and furniture. Along the way, to ensure a steady supply of materials, Masonite acquired some 500,000 acres of land. Not only did the company benefit from timber sales, it also made money from producing oil wells on its property. During the 1950s Masonite faced increased competition, resulting in lower prices for its products. As a result, it cut expenses, to the detriment of the flagship Laurel plant, which was no longer upgraded on a regular basis, and management began to focus on selling pre-finished hardboard and specialties.
Masonite remained a prosperous company through the 1970s, but a housing slump early in the 1980s had an adverse impact. Weakened, Masonite found itself the target of corporate raiders of the 1980s who realized the breakup value of the company. To thwart a takeover, management sold off hundreds of thousands of acres of timberland, taking in $80 million, but being cash rich only made Masonite an even more attractive target. Faced with a takeover attempt by General Felt Industries Inc., management decided to accept a buyout offer from building-materials manufacturer United States Gypsum Co. (USG), which paid $380 million to acquire about 95 percent of the company. It was a time of change for the company in other ways as well. Mason's method of producing hardboard was superceded by a new, cheaper technology—oriented strand board, OSB. It was rushed into the marketplace without proof that in outdoor applications it could absorb moisture after years of exposure to rain and snow, a fact that would later come back to haunt the company.
Under USG ownership Masonite dropped some product lines and added others, but remained a very profitable business. In 1987 it generated $529 million in sales and a pretax profitof $58 million. But Masonite would change corporate parents in 1988 when USG was itself threatened by a hostile takeover bid. As part of a recapitalization and restructuring plan, USG sold Masonite to International Paper Company for approximately $400 million. International Paper hoped that Masonite would complement efforts to improve its wood-products and laminated-panels businesses.
In 1995 a class-action lawsuit was filed against Masonite, alleging that its exterior siding, made using the OSB process, failed to stand up to moisture, "that it will rot, buckle, discolor, deteriorate . . . after only a few years." Masonite countered that the siding, which carried a 20- to 25-year warranty, either had not been installed correctly or had not been properly maintained by homeowners. A state court jury in Mobile, Alabama, found in September 1996 that the siding was defective. Before the next phase of the trial was to begin, and rather than prolong the matter through the court system, International Paper agreed to a $197.5 million settlement in July 1997.
Merger of Premdor and Century Wood Door in 1989
During the 1990s Masonite forged an alliance with Premdor, so that the two companies were working together on a global basis. Premdor became Masonite's largest customer, and Masonite became Premdor's largest supplier. Premdor was launched in 1979 by Saul Spears, who was president of the door-making business of Seaway Multicorp Ltd. and led a buyout of the unit. The Toronto-based company was known as Premium Forest Products Ltd. until 1986, when it changed its name to Premdor and went public. The Canadian door market became highly competitive in the late 1980s with Premdor and its chief rival, Century Wood Door Ltd., finding themselves in a difficult bind, facing a lengthy and costly fight over market share. Instead, the two companies decided to join forces, and in 1989 they merged under the Premdor banner. Spears became chairman of the company, and Century's president, Philip Orsino, took over as president and chief executive officer. Orsino would be instrumental in the rapid growth of Premdor in the 1990s and in the eventual acquisition of Masonite.
Orsino, a Toronto native, earned an undergraduate degree from the University of Toronto in 1976 and went to work for the accounting firm of Hilborn Ellis Grant. Three years later he became a certified public accountant and a partner in his firm. Many of his clients were builders and contractors, and some of his in-laws were also involved in the building-products industry. Because he had always wanted to run a business, it was not surprising that he seized upon an opportunity to become directly involved in building products. During a recession in the early 1980s there was a fallout in the door industry so that only one door company was left operating in eastern Canada. In November 1982, while still an accountant, he and a small group of investors launched Century with less than $1 million. By 1984, when a new investor entered the picture, he quit the accounting firm to take over as Century's president. "By then," he recalled in a 2003 interview, "I was convinced that we could grow it to any size we wanted, that the opportunities were unlimited."
Through a variety of strategic marketing initiatives the company is committed to growing the Masonite brand.
After Century and Premdor merged, Orsino's ambitions were given free reign. He looked to the south, eyeing the large and lucrative U.S. market, and restructured Premdor into two divisions, one devoted to the Canadian market and the other to the U.S. market. The next three years were challenging, as Premdor had to spend a great deal of money to consolidate the 20 plants and distribution centers joined together in the merger, as well as the purchase of U.S. door companies. As a result, Premdor lost $3.7 million in 1989, $1.9 million in 1990, and another $1.7 million in 1991. But Orsino had doubled the size of the company during this period and was making significant inroads in the U.S. market. Because the cost of shipping doors was such a major factor in price, it was important, to be competitive and gain significant market share in the United States, for Premdor to buy local doormaking operations. Another major step in the company's growth came in 1993 when Premdor, in addition to having its stock traded on the Toronto and Montreal Stock Exchanges, became listed on the New York Stock Exchange, a move that provided greater exposure to the investment community and led to increased funding for its ongoing expansion plans. At this point, approximately 70 percent of Premdor's facilities and personnel were operating in the United States. But the company was still in acquisition mode. All told, between 1989 and 2000, Premdor completed 43 acquisitions, mostly of manufacturers.
The Masonite sale made sense to both International Paper and Premdor. After International Paper merged with Union Camp Corporation in 1999 and acquired Champion International Corporation the following year, it sought to focus on its main business of making paper products. As part of a long-term strategy, International Paper decided to shed more than $3 billion in noncore assets, including Masonite. Premdor, on the other hand, was interested in expanding internationally and becoming more vertically integrated, and the addition of Masonite could forward both of these goals. An agreement was reached in September 2000 for International Paper to sell Masonite to Premdor for $523 million, but a year would pass before the two sides were able to gain regulatory approval and the deal was completed. In the meantime, the price of Premdor's stock fell to an eight-year low before slowly rebounding, as many investors were afraid that the company would take on an excessive level of debt to finance the acquisition. During the regulatory process, however, the deal was refined, including the divestiture of some assets as required by the U.S. Justice Department and a lowering of the purchase price. In the end, Premdor paid $427.3 million for Masonite.
Masonite became involved in the door business in the 1970s when it began making wood-composite moulded door facings, but was not readily associated with doors. Nevertheless, from the very beginning of the Masonite acquisition, Orsino planned to adopt the Masonite name. Premdor, though well known in Canada, was not widely recognized in the United States. The Masonite name, on the other hand, had international scope and was essentially a generic term for hardboard itself. As Orsino explained to the Financial Post, "It was a name that consumers recognized and builders recognized. What we did was to try to take advantage of the fact that people knew the name and consumers knew the name. Then we repositioned it and initiated a marketing strategy to associate the name with a beautiful line of interior and exterior doors. So we changed the logo, we changed the name of the company from Masonite Corp. to Masonite International Corp., and we came up with the tag line, 'Masonite: The Beautiful Door."'
Premdor's name change to Masonite took effect on January 1, 2002. As the company continued its rebranding efforts, it shifted from a growth-by-acquisition strategy to one dominated by the pursuit of organic growth opportunities. Masonite would look to enter new geographic markets around the world, in some cases by just selling wood-composite moulded door facings to other door manufacturers. The company also pursued an all-product strategy. "The idea," according to Orsino, "is to look at all our customers, some who are only buying interior doors or some that are only buying entry doors, and try to get them to buy the full product line." Nevertheless, if a suitable acquisition candidate emerged, Masonite was willing to take advantage of an opportunity. In a deal completed in March 2004, Masonite paid $160 million to acquire the residential entry door division of The Stanley Works, a business that contributed about $200 million in annual sales.
Premdor U.S. Holdings, Inc.; Premdor Corporation; Premdor Mouldings, Inc.; Europa Door Limited.
- Mason Fiber Company is formed.
- Mason Fiber is renamed Masonite Corporation.
- Premdor, Inc. is formed.
- International Paper acquires Masonite.
- Premdor and Century Wood Door Ltd. merge.
- International Paper acquires Masonite.
- Premdor changes its name to Masonite International Corporation.
Atrium Companies, Inc.; International Aluminum Corporation; Pella Corporation.
Cohen, Laurie P., "International Paper Plans to Buy USG's Masonite," Wall Street Journal, October 3, 1988, p. 1.
Gates, Bruce, "U.S. Opportunity Knocks for Canadian Doormaker," Financial Post, November 30, 1991, p. U7.
Jones, Kevin D., "The Making of a Dinosaur," Mississippi Business Journal, July 1989, p. 14.
"Opportunity Knocked," Financial Post, November 1, 2003.
"That Wonderful Leaky Valve," Nation's Business, February 1972, p. 84.