Benzinga | Jan 10, 2022 06:58AM EST

Griffon Corporation Sends Letter To Shareholders Highlighting Strategic And Financial Benefits Of Acquisition Of Hunter Fan Company

Griffon Corporation ("Griffon" or the "Company") (NYSE:GFF) today sent a letter to shareholders highlighting the strategic and financial benefits of its proposed acquisition of Hunter Fan Company ("Hunter").

This press release features multimedia. View the full release here: https://www.businesswire.com/news/home/20220109005061/en/

Indexed Stock Price Performance Between 20-Dec-21 and 24-Dec-21. 1. Financial profile figures based on FY2021 figures. For Griffon, FY2021 ended 9/30/2021 and includes Telephonics. For Hunter, FY2021 ended 10/29/21. See the reconciliation of Pro Forma EBITDA to Income before taxes from continuing operations or Net income, as appropriate, at the end of this release. 2. FCF Conversion defined as EBITDA less Capex divided by EBITDA. (Graphic: Business Wire)

Griffon's Board of Directors urges shareholders to protect the future of the Company and the value of their investment by voting the WHITE proxy card today "FOR" all four of the Company's highly qualified director nominees. The Company's Annual Meeting of Shareholders (the "Annual Meeting") will be held on February 17, 2022 at 10:00 a.m., ET at the offices of Dechert LLP, located at 1095 Avenue of the Americas, New York, NY 10036. Shareholders of record as of close of business on December 28, 2021 will be entitled to vote at the meeting.

The proxy statement and other important information related to the Annual Meeting can be found at ir.griffon.com.

The full text of the letter follows:

January 10, 2022

Dear Fellow Shareholder,

Ahead of our 2022 Annual Meeting of Shareholders, we wanted to provide you with some additional information about our proposed acquisition of Hunter. We entered 2022 from a position of strength and are aggressively moving forward with our previously announced repositioning strategy with the next step being the closing of the Hunter acquisition.

* Hunter acquisition will create both immediate and long-term value for shareholders; the transaction will be immediately accretive to earnings and cash flow

* Hunter acquisition has already received strong support from investment and financial community

* Griffon urges all shareholders to vote "FOR" the 4 highly qualified Griffon directors on WHITE proxy card

We are extremely pleased with our progress in the financing markets to acquire this iconic market leader in residential ceiling, commercial, and industrial fans. Hunter has a 135-year heritage with a strong reputation for innovation and superior quality. Hunter has an impressive customer roster, with top customers including The Home Depot, Lowe's, Menards, Costco, and Amazon. Hunter also has a direct relationship with consumers through its robust e-commerce business.

The Hunter acquisition continues our long-standing, disciplined M&A strategy. We remain enthusiastic about Griffon's significantly improved prospects with the addition of Hunter. The acquisition meets all our criteria for a value-enhancing transaction for Griffon shareholders:

Griffon M&A HunterCriteria

Accretive to ? * EPS accretion expected to be at least $0.50 perearnings share in the first full fiscal year

Attractive ? * 9.4x expected EBITDA transaction multiplepurchase price

Strengthens ? * Top consumer brand in its categoryportfolio

Cross-selling ? * Complementary customer / product portfolio andopportunities operational strengths

Ability to ? * Upside through Griffon?s best-in-class operationalexecute expertise

In addition to being immediately accretive in fiscal 2022 to Griffon's earnings per share, we expect Hunter will contribute at least $0.50 per share to Griffon's EPS in fiscal 2023. Furthermore, the acquisition will complement our existing portfolio of iconic consumer and professional brands and allow us to further diversify our channels to market and expand our opportunities for revenue growth. We expect this deal to close before the end of January.

Hunter has several strategic and financial benefits.

Hunter has attractive end markets with steady growth and beneficial secular trends along with low cyclicality and volatility. Hunter is the leading North American brand of residential ceiling fans and has a strong track record of successful new product launches. In addition, with EBITDA margins north of 20%, the acquisition clearly improves Griffon's EBITDA and gross margins. Finally, its committed and experienced management team has a track record of value creation and will be a valuable asset to our team.

Investors have reacted positively, as evidenced by the market's reaction to the announcement. In the week after announcement, Griffon's stock clearly outperformed the relevant market indices.

The acquisition also received support from the analyst community -- pointing to the deal's attractive margins, healthy growth and asset-light business model, which supports value creation. We are pleased to have received support from the investment and analyst community following our announcement. On December 21, 2021, Sidoti wrote:

"Our first impressions of the deal are positive, as Hunter adds a high-margin, innovative and asset-light business that can accelerate the CPP segment's growth profile and ecommerce channel penetration."

Additionally, CJS Securities wrote:

"While no synergies are contemplated in the $0.50+ accretion, the combination of the two companies is very attractive. In addition to potential cost synergies, Hunter's integration into Griffon's US distribution footprint, plus the upgraded systems in process under the Ames initiative could meaningfully help the brand. Additionally, Ames can learn and advance its omni-channel marketing and fulfillment from Hunter's strong knowledge in this area."

With a similarly positive view, Deutsche Bank wrote:

"We think the acquisition has solid strategic merits given the end-markets it serves have significant overlap with the existing businesses within CPP. There are also likely to be cost (i.e. distribution, overheads) and revenue (i.e. non-US based markets, and nascent product verticals) synergies which have not been included in the metrics provided by management. Additionally, we do not sense the management team will deviate from prioritizing debt reduction with not only expected proceeds from the likely sale of Telephonics - our estimates are up to $250mn - but also from significant free cash flow the legacy and Hunter will generate."

Despite a positive reaction from Wall Street analysts and investors, Voss Capital LLC, an approximately $300 million hedge fund run by 34 year-old Travis Cocke, has publicly opposed the Hunter acquisition and is waging a proxy contest to replace two of Griffon's directors. Mr. Cocke's fund first became a shareholder of Griffon in August of 2021.

Mr. Cocke's criticisms of the Hunter acquisition show his fundamental misunderstanding of our business and his lack of alignment with our other shareholders. Furthermore, Mr. Cocke's criticisms of the deal are misleading and baseless. Mr. Cocke claims that the transaction poses execution risk when Griffon's management team has a clear track record of successful M&A execution and integration. Voss also alleges that the transaction has an unattractive valuation. In reality, the Hunter acquisition is at an attractive valuation compared to current transaction multiples. Mr. Cocke claims that the acquisition poses a conflict of interest for director Kevin Sullivan. Nothing could be further from the truth as the transaction was negotiated at arm's length, a process from which Mr. Sullivan was excluded.

We believe that Mr. Cocke's opposition to the Hunter acquisition is driven by his short-term focus and that Voss completely ignores the strategic and financial benefits of the acquisition and the potential for value creation for shareholders. Voss disregards the positive reaction that the transaction has received from the investment and analyst community.

We are a strategic, focused buyer and builder of businesses with a proven track record of shareholder value-creation, including value-enhancing acquisitions and divestitures. Our corporate structure also allows us to act as a smart buyer, consolidating businesses that fit together and fueling their growth, while maintaining a disciplined approach to evaluating opportunities. Over the years Griffon has demonstrated this discipline and its ability to successfully integrate and improve the businesses it has acquired, from AMES in 2010, to ClosetMaid in 2017 and CornellCookson in 2018.

Not only do we create value by adding businesses, but also by selling them, returning cash to shareholders and investing in organic growth. Our management team and Board continue to drive Griffon's evolution, creating a more streamlined, profitable portfolio, through the sale of legacy businesses like Clopay Plastics and executing on value enhancing acquisitions. The next phase of this evolution includes the review of strategic alternatives and sale process underway for our Defense Electronics business, which we announced in September 2021, and the acquisition of Hunter. We remain excited about continuing to build value for our shareholders.

A top priority of the Board of Directors is to ensure the Board is composed of directors who bring diverse viewpoints and perspectives, exhibit a variety of skills, have professional experience and a variety of backgrounds, and will continue to effectively represent the long-term interests of shareholders. As part of our plan to reach these objectives, our director slate includes a new nominee, Ms. Michelle L. Taylor. Michelle brings a broad range of industrial experience, particularly in the areas of manufacturing, supply chain management and quality, critically important areas of focus for Griffon and its businesses.

We strongly urge shareholders to vote the WHITE proxy card FOR all our highly qualified and experienced director nominees and FOR all our other proposals, including the important corporate governance enhancements recommended unanimously by the full Griffon Board of Directors.

Your vote is important! Please vote today by internet or mail. The Company's Annual Meeting of Shareholders will be held on Thursday, February 17, 2022 at 10:00 a.m., ET at the offices of Dechert LLP, located at 1095 Avenue of the Americas, New York, NY 10036. Shareholders of record as of close of business on December 28, 2021 will be entitled to vote at the meeting.

We look forward to engaging with you further as the Annual Meeting approaches and, as always, we appreciate your investment in Griffon and ask for your continued support.

Sincerely,



/s/ Henry A.Alpert /s/ Thomas J. Brosig /s/ Jerome L. Coben



/s/ Rear Admiral Robert G./s/ Louis J. Harrison (USN Ret.) /s/ Lacy M. JohnsonGrabowsky

/s/ General Victor E. Renuart/s/ Ronald J. /s/ Robert F. Mehmel (USAF Ret.)Kramer

/s/ James W. /s/ Samanta Hegedus StewartSight /s/ Kevin F. Sullivan

/s/ Cheryl L.Turnbull /s/ William H. Waldorf



The Griffon Board of Directors