Middlefield Village officials and Geauga Growth Partnership are in contact with Masco Corporation about its plans to sell its Kraftmaid operations within the year.
Middlefield Village officials and Geauga Growth Partnership are in contact with Masco Corporation about its plans to sell its Kraftmaid operations within the year.
On June 18, Masco issued a release saying they have concluded their strategic review of their cabinetry and window productions and will pursue the sale of the businesses.
Kraftmaid, established in Middlefield in 1969, has 1,922 employees, said Leslie Gambosi-McCoy, village economic development director, on June 24.
“We’re not surprised,” she said, adding Masco announced the company would be making a recommendation in June. The sale could take six to nine months, according to the press release.
McCoy said the village is still in information-gathering mode and plans to stay in contact with company officials.
“We’ll reach out to Kraftmaid yet again,” she said.
Optimally, Livonia, Michigan-based Masco will sell the operation intact to another company interested in producing the high-quality kitchen and bathroom cabinets for which Kraftmaid is renowned, but details are sketchy.
“We don’t know, yet,” she said. “They are following their process.”
Tracy Jemison, CEO of GGP, said he has been aware of Masco’s plans for some time.
“It has certainly been on our radar, but its very preliminary on our end,” he said. “We have had some conversations.”
Masco acquired Kraftmaid in the mid or late 1990s, but hadn’t started using the Masco name until more recently, Jemison said.
GGP’s goal is to encourage Masco to sell the operation to someone interested in continuing to produce cabinets, he said.
Keith Allman, Masco’s president and CEO, said the board of directors has been evaluating the corporation’s holdings to decide which is the best way to create value for Masco shareholders.
“We have determined that pursuing the sale of Masco Cabinetry, Milgard Windows and UK Window Group in three separate transactions is the most appropriate path forward,” he said in the press release.
A Kraftmaid operation in Orwell is also part of the sales plan, Allman said.
The company website reported in 2018 net sales for cabinet products was about $950 million with an operating budget of about $86 million.
Over the last five years, Masco has spun off its installation services business to improve its cabinetry and window operations and reduce the cyclical nature of those industries.
“The strategic actions we are announcing today will complete the process of reducing our exposure to the new construction segment of the market and position us to focus on our less cyclical plumbing products and decorative architectural products businesses going forward,” Allman said.
Masco’s move may be an effort to buffer the corporation from changes in the housing market in the U.S.
Andrea Riquer wrote in her June MarketWatch column the combination of the Federal Reserve Board of Governors’ three increases in mortgage interest rates and a shortage of available houses may be combining to create a housing market correction in the coming year.
In January 2019, the U.S. Census Bureau reported there were 1.33 million housing units started across the country, which was a 10-year high, but it appears the market has passed its cyclical peak, she wrote.
The crash of 2008 isn’t likely to be repeated because the dynamics are very different, Riquer said, adding the housing industry implosion that kicked of the Recession was due to speculation in the housing construction industry and an overabundance of homes for sale.
She credited a possible future correction to a supply-demand imbalance, with fewer homes being available, Riquer said.
In addition, the lending practices that fueled the crisis have been strongly regulated to curtail predatory lending, she said.
