By: Michael Lauzon By: Rhoda Miel
February 12, 2013
CINCINNATI -- Milacron LLC has acquired Canadian hot runner specialist Mold-Masters Ltd. from London-based investment firm 3i Group plc.
The deal combines major brands in machinery (Milacron), hot runners (Mold-Masters) and mold components including bases and plates (DME).
Cincinnati-based Milacron said it will acquire 100 percent of Mold-Masters' shares for an enterprise value of C$975 million (US$968 million).
The combination of DME and Mold-Masters will likely make the company either the biggest or second biggest hot runner system supplier in the world, said Jeff Mengel, a partner with Plante & Moran pllc.
"DME has always had a hot runner system, but Mold-Masters is one of the big boys, and DME was always small in comparison," Mengel said.
Even more significant, he said, the combination of Mold-Master's expertise in providing complex hot runner systems to engineered plastics production combined with DME's strength in mold bases and components will create a leader in complete mold making systems. That strength will be especially needed in North America and other mature markets where molders are turning to in-mold automation and other advanced technology to streamline production.
Husky Injection Molding Systems Ltd. of Bolton, Ontario, has similar capabilities in engineered systems combining mold making, hot runners and molding, but it has focused its energy on products for packaging. A combination of Milacron, DME and Mold-Masters can conceivably take that complete system to a far wider user base, Mengel said.
The question remains, though, how tightly DME wants to wed itself to Milacron's machines.
"I would have argued in the past that DME was agnostic as to what system its mold components are used on, but that could change," he said. "The next question will be whether they want to synergize DME with Milacron."
The deal is scheduled to close by April, according to 3i.
"Mold-Masters' expertise in the high-growth hot-runner market is second to none, and we are excited by the unique customer value proposition and numerous opportunities for growth that will result from this combination," Milacron CEO Tom Goeke said in a news release.
Milacron was purchased by CCMP Capital Advisors in 2012.
Early this year there was speculation that 3i planned to sell its stake in Georgetown, Ontario-based Mold-Masters. It was reported that 3i hired Morgan Stanley to advise on the sale. At the time, sources pegged the possible sale price at C$700 million (US$711 million).
Both Milacron and Mold-Masters have worldwide operations.
Milacron's Goeke will head the combined companies, while Bill Barker, Mold-Master's president and CEO, will continue in that role.
Goeke said the deal amounted to the creation of a global leader in the plastics industry "with the scale, technological leadership, international presence and competitive positioning to deliver a wide range of products and services to more customers in more markets around the world."
Goeke paid tribute to Barker, his management team and staff: "We are thrilled that they will continue to lead the Mold-Masters business going forward and are excited to welcome them to our team."
Barker said he was very excited at becoming part of the Milacron team and working with Goeke and his colleagues.
"We have developed deep relationships with our customers over the course of many years and will continue to work closely with them to deliver the products and services they rely on, just as we do today.
"I am confident that combining Mold-Masters' unique capabilities with Milacron's will position the new company to provide even greater benefits to customers," Barker said.
The acquisition settles a lingering question Mengel said he and others have had during the past years as they watched Milacron find success with its machines -- namely if it would retain DME's bases and components. While DME has always been a consistent financial performer, even during the recession, it did not seem to get the same corporate attention.
Adding Mold-Masters to the corporate stable is a strong indication that for DME's long-term survival, he said.
According to the Reuters news agency, 3i's decision to sell was prompted by a desire to slash its £1.2 billion debt pile to £1 billion by the end of June.
3i Group will realize proceeds of C$347 million (US$345 million) from the sale, with the bulk of the rest going to other shareholders. The gain for 3i was 90 percent higher than what 3i valued its stake in Mold-Masters at 3i's fiscal year end on March 31, 2012.
At that time, 3i's book value of Mold-Masters was £115 million (US$179 million), which increased to £158 million ($246 million) by Dec. 31.
Since 3i's initial investment in Mold-Masters in 2007, the company has grown organically in Asia, Europe and South America, and through acquisition. According to 3i, between 2009 and 2012, Mold-Masters "substantially grew its market share" and boosted its sales from C$168 million to C$271 million, representing a compound annual growth rate of 17 percent.
3i started planning for a sale last summer, and initiated an auction for Mold-Masters in late 2012. The investment firm described the process as "highly competitive," with interest from a wide range of private equity and strategic buyers.
The companies signed a definitive agreement on Feb. 12. The deal is subject to regulatory approvals.
Simon Borrows, 3i's chief executive, said: "Strong businesses like Mold-Masters are always in demand and today's news is an example of what can be achieved from careful planning and a well run auction process underpinned by robust market conditions."
Ken Hanau, managing partner for 3i North America, added: "Over the last five years, 3i has worked closely with the Mold-Masters management team, supporting the company's growth in emerging markets, the expansion of its product offering and the diversification of its end-customer base. The company is well positioned for continued future growth as part of Milacron.
Milacron generated about $780 million of sales in 2011. The company's machinery line-up includes injection molding machines, extruders, blow molding machines and structural foam molding machines.