Milacron gains big in Mold-Masters deal

By Michael Lauzon
Correspondent

Published: February 20, 2013 1:25 pm ET
Updated: February 20, 2013 1:36 pm ET

Image By: Milacron LLC Tom Goeke will head the combined companies.

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Topics Suppliers, Dies, Machinery, Molds/Tooling
Companies & Associations Companies & Associations, Milacron LLC

CINCINNATI -- Milacron LLC is acquiring 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$970 million).

The combination of DME Co. LLC and Mold-Masters will likely make the company one of the largest global suppliers of hot-runner systems. But Milacron CEO Tom Goeke said they will be run as separate businesses.

"We don't intend to integrate DME and Mold-Masters," Goeke said in a Feb. 13 telephone interview. The companies could get together early in the mold design stage and incorporate components, he noted.

In the past, DME and Mold-Masters have not worked together much, according to Dave Lawrence, Milacron's president of worldwide plastics machinery for injection, extrusion and mold technologies.

Milacron's Goeke will head the combined companies, while Bill Barker, Mold-Master's president and CEO, will continue in that role.

Together the companies have sales of more than US$1.1 billion and employ more than 4,500, according to Milacron.

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 is 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," Barker said.

"I am confident that combining Mold-Masters' unique capabilities with Milacron's will position the new company to provide even greater benefits to customers," he said.

The acquisition settles a lingering question that some in the industry have had during the past years as they watched Milacron find success with its machines — namely whether 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, said Jeff Mengel, a partner with Plante & Moran PLLC.

Adding Mold-Masters to the corporate stable is a strong indicator for DME's long-term survival, Mengel said.

Goeke said the cyclability of Milacron's molding machine business will be partly offset by steadier business in hot runners. Machines can take weeks or months to build, but hot-runner production schedules are usually measured in days.

DME and Mold-Masters each have massive databases they can access, according to one expert who asked not to be identified. New areas for Mold-Masters would be DME cold decks for liquid silicone rubber, hot runners for bio-based resins and numerous joint ventures and technology licensees.

"This is not a cost-saving play," Goeke stressed in an interview. "It's a top-line technology investment."

Both Milacron and Mold-Masters have worldwide operations. DME and Mold-Masters have similar geographic profiles, although Mold-Masters is a bigger player in Asia, according to Lawrence. A key DME facility in that area is a factory in India. Mold-Masters has invested heavily in China in recent years.

The deal is scheduled to close by April, according to 3i.

Early this year there was speculation that 3i planned to sell its stake in Georgetown, Ontario-based Mold-Masters. Reports said that 3i hired New York-based Morgan Stanley to advise it on the sale. At the time, sources pegged the possible sale price at C$700 million.

According to the Reuters news agency, 3i's decision to sell was prompted by a desire to slash its £1.2 billion (US$1.9 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$180 million), which increased to £158 million ($248 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 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 was purchased by CCMP Capital Advisors in 2012. In 2012, Milacron generated sales estimated at more than $830 million, up from about $780 million in 2011. The company's machinery lineup includes injection molding machines, extruders, blow molding machines and structural foam molding machines.

In addition to machinery and DME mold components, Milacron runs businesses in aftermarket parts and services and Cimcool fluid technology for metalworking fluids and services.

"If there's a common thread, it's that each one of these businesses is technology-driven, customer-focused, operationally excellent," said Milacron spokes­- woman Mary Scheibel.

Mengel speculated that Mold-Masters' 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.

Husky's vice president of marketing, Jeff MacDonald, said he could not comment on how Milacron and Mold-Masters will move forward.

"This news does not change our direction or affect our momentum in any way," MacDonald said in an email correspondence.

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," Mengel said. "The next question will be whether they want to synergize DME with Milacron."

Plastics News reporter Rhoda Miel contributed to this story.


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Milacron gains big in Mold-Masters deal

By Michael Lauzon
Correspondent

Published: February 20, 2013 1:25 pm ET
Updated: February 20, 2013 1:36 pm ET

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