22NW Issues Letter to the Board of Huttig Building Products Opposing Mill Road's Acquisition Proposal

Rhea-AI Summary

On October 22, 2020, 22NW, LP, a major stockholder of Huttig Building Products (NASDAQ: HBP) owning approximately 7.9% of shares, publicly challenged the recent $4 per share acquisition offer from Mill Road Capital Management. 22NW considers this offer inadequate, citing previous bids of $2.75 per share in August 2020. The firm argues that Huttig's fasteners brand, Huttig Grip, is poised for growth despite COVID-19 challenges, predicting an EBITDA run rate of $32 million and potential stock prices up to $12 per share within three years. They urge the Board to reject Mill Road's bid.

Positive

• Potential EBITDA run rate of $32 million within three years.
• Huttig Grip brand gaining traction before COVID-19 impact.
• Expectations for the stock price to reach $9-$12 per share.

Negative

• COVID-19 has obscured growth and led to a depressed share price.

SEATTLE, Oct. 22, 2020 /PRNewswire/ -- 22NW, LP ("22NW" or "we"), one of the largest stockholders of Huttig Building Products, Inc. ("Huttig" or the "Company") (NASDAQ: HBP), with ownership of approximately 7.9% of the Company's outstanding shares, today issued a public letter to the Board of Directors of Huttig stating 22NW's belief that the proposed consideration of $4 per share offered by Mill Road Capital Management LLC and its affiliates to acquire all outstanding shares of the Company is far too low.

The full text of the letter follows:

October 22, 2020

Dear Board of Directors,

22NW, LP ("22NW", "our" or "we") is a significant stockholder of Huttig Building Products, Inc. ("Huttig" or the "Company") with beneficial ownership of over 2.1 million shares, representing approximately 7.9% of the Company's outstanding shares. We note that Mill Road Capital Management LLC and its affiliates (collectively, "Mill Road") made an unsolicited offer of $2.75 per share for Huttig in August 2020, and increased the offer to $4 per share in mid-October. We believe that the price of Mill Road's unsolicited offer to acquire the Company is grossly inadequate, and we urge the Company's Board of Directors to reject this offer.

Huttig began the national expansion of its line of fasteners, called "Huttig Grip," in 2017. Our diligence on Huttig has revealed that while the Company had some initial logistical difficulties and disruptions with the expansion of its fasteners business, a majority of the problems had been resolved by 2019, and the Huttig Grip brand was gaining significant traction prior to the COVID-19 pandemic. We believe that the Huttig Grip brand of fasteners will continue to successfully expand, resulting in significant revenues and EBITDA growth for the Company, but that COVID-19 has obscured this progress and temporarily led to an unduly depressed share price. In addition, we believe that low interest rates will fuel a strong housing market for several years, as evidenced by the recent record high level of the NAHB / Wells Fargo Housing Market Index.¹ Because of these factors, we believe that the Company can achieve an EBITDA run rate of $32 million or better within the next three years and a potential stock price of $9 per share in a base case or $12 per share in a bull case in that time frame.

We believe the $4 per share offer proposed by Mill Road is unreasonably low and reflective of trough EBITDA results, and we see no reason why the Company's stockholders should give up potentially significant future upside by accepting Mill Road's opportunistic bid for the Company.

Sincerely,

Aron English
President
22NW, LP

About 22NW, LP

22NW, LP is a Seattle-based investment firm that specializes in small and microcap investments that have multi-year investment horizons.

Contact:

Aron English
22NW, LP
(206) 227-3078

¹ https://www.cnbc.com/2020/10/19/homebuilder-sentiment-sets-another-record-high-in-october.html

View original content:http://www.prnewswire.com/news-releases/22nw-issues-letter-to-the-board-of-huttig-building-products-opposing-mill-roads-acquisition-proposal-301158419.html

SOURCE 22NW, LP

FAQ

What did 22NW, LP state about Mill Road's acquisition offer for Huttig (HBP)?

22NW stated that Mill Road's $4 per share offer is too low and urged the Board to reject it.

What is the significance of the Huttig Grip brand for Huttig Building Products (HBP)?

The Huttig Grip brand is seen as a key driver for revenue and EBITDA growth, especially after initial issues were resolved.

What are the future projections for Huttig Building Products (HBP) according to 22NW?

22NW projects that Huttig could achieve an EBITDA run rate of $32 million and a stock price of $9-$12 per share in the next three years.

How does COVID-19 impact Huttig Building Products (HBP)'s stock price?

COVID-19 has obscured Huttig's growth potential and contributed to a depressed stock price according to 22NW.