Strategic buyers in for the long term

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This week’s Plastics News has something different: stories about strategic buyers picking up major component makers from their private equity owners. And the businesses they’re buying — Xaloy Inc., Synventive Molding Solutions Inc. and Extrusion Dies Industries LLC, cover the broad spectrum of plastics.

And both buyers are publicly traded. That certainly goes against the tidal wave of private equity money that has swept through some sectors of plastics.

The deals give instant exposure to Nordson Corp. and Barnes Group. We report on Nordson, which is buying Xaloy and EDI, on Page 4 of the July 23 print issue. The story on Barnes buying Synventive is on Page 7.

There always seems to be a ton of private equity money out there, sloshing around, looking for a home. Plastics News has dutifully covered lots of big private equity acquisitions, especially in packaging, a high-volume, low-margin business where bigger means more clout to buy resin. At times it seems like there are more stories on high finance and deal making than on technology to make plastic parts.

The machinery sector is just as competitive, but equipment is much more cyclical. Some years it’s tough to make any money. But that hasn’t stopped private equity from sweeping through the machinery sector.

It’s getting to the point where you need a program to know who owns what, although it shouldn’t much matter to customers, unless the private equity company makes huge changes.

But from a journalistic perspective, it’s tough to shine much light on news stories that one private equity firm has sold to another private equity firm. Most private equity executives don’t want to talk; they don’t call you back, let alone discuss plans to make improvements or just polish up their holding for a sale in the requisite three to five years.

Let’s hope they will talk to major customers, who may have some of these questions.

There is a ton of information about Nordson and Barnes. We already know the price. You can study their financial documents, listen to quarterly earnings calls, read analyst reports. Nordson even had a special conference call with analysts to explain its purchase of Xaloy. You can even buy stock in the company and attend the annul shareholders meeting.

As strategic buyers, officials of Nordson and Barnes Group say they are long-term buyers. That should give customers a comfort level.

The deals also shine a positive light on the overall plastics industry. Nordson already had a bit of plastics molding, and owned a Belgian flat-die maker similar to the newly purchased EDI. But Xaloy brings screws and barrels used across the broad expanse of plastics processing. Xaloy’s melt pumps, screen changers and pelletizers are widely used in extrusion.

The same can be said about Synventive hot runners, a major force in injection molding. Barnes Group is a maker of precision metal components and springs.

So you have two public industrial companies, each with more than $1 billion in sales, buying some of the biggest names in plastics — and in effect, “buying” the broad plastics industry.

Nordson and Barnes have their own separate strategies. Still, it’s clearly a vote of confidence in the long-term future of plastics.