Related to this story
Topics Mergers & Acquisitions, Construction, Electrical/conduit, Extrusion, Pipe/Profile/Tubing
UPDATED Aug. 22, 2014
MEXICO CITY — PVC pipe and specialty chemicals maker Mexichem SAB de CV said it has agreed to buy Dura-Line Corp., a prominent manufacturer of high density polyethylene conduit, duct and pressure pipe for telecommunications and data communications, from CHS Capital for $630 million.
Antonio Carrillo Rule, Mexichem’s managing director, said Aug. 22 that the Dura-Line deal should be approved in September.
“We think Dura-Line will be our springboard into the United States,” he said in a news conference in Mexico City. Speaking in Spanish, he added that Mexichem’s strategy for all its businesses in the foreseeable future is consolidation. “Our focus is not to seek more acquisitions, although we don’t want to close the door entirely.”
Dura-Line specializes in making conduit for fiber-optic materials. Customers include AT&T and Google, he said.
He added that India, where Dura-Line operates several plants, “is a large market that is underdeveloped. We think it’s a great moment to enter India, not only as regards pipe but all segments of the market.”
Talks between Mexichem and CHS began about three months ago after an approach from the Mexican company, said Tanya Kanczuzewski, a spokeswoman for Dura-Line.
“Dura-Line was not for sale,” she said. “There were ongoing talks and discussions on business opportunities which led to Mexichem reaching out about a possible acquisition.”
The acquisition was Mexichem’s second major foray into international markets in August. On Aug. 5 it agreed to buy German PVC paste producer Vestolit GmbH from investment company Strategic Value Partners LLC (SVP Global) for 219 million euros ($293 million).
Dura-Line, which employs 1,500, is one of the largest plastic pipe extruders in North America, according to Plastics News’ rankings. Based in Knoxville, Tenn., it supplies the energy and infrastructure industries, in addition to the telecom and data communications sectors. It has manufacturing operations in the United States, Mexico, South Africa, India, Oman, Dubai and the Czech Republic.
Kanczuzewski said 75 percent of its business is “based in the U.S.”
In Mexico, Dura-Line has manufacturing operations in Querétaro and San Luis Potosí, whereas in India it has plants in Goa, Mumbai, Neemrana and New Delhi.
The company posted 2013 sales of $630 million, including North American pipe sales of $475 million, according to PN’s recent ranking.
Dura-Line’s international footprint will allow Mexichem to “increase penetration in key markets, and will also provide a platform for growth in new geographies for all of Mexichem’s products,” Carrillo said in a statement posted on the Mexican Stock Exchange.
CHS Capital is based in Chicago. The private equity firm bought Dura-Line from Boston-based equity company Audax Group in 2012. Shortly after finalizing that deal, Dura-Line bought Polypipe Holdings Inc. of Gainsville, Texas.
The company has continued to pursue growth under CHS. Earlier this year, Dura-Line announced plans to spend $10 million on technology and infrastructure that will increase capacity at three of its 11 U.S. plants, in Gainesville and Midland, Texas, and Elyria, Ohio. The technology upgrade includes extruders, gravimetric controls, monitoring systems and automation.
Speaking briefly to Plastics News in English after the news conference, Carrillo said: “We see growth in the United States. We believe it’s a growth market in the two sectors in which we are strong, telecommunications and energy. There are still opportunities for Mexichem” in the United States.
Explaining his earlier comments about Mexichem not seeking more acquisitions for the moment, he said the Mexichem board wants to reduce the company’s debt.
When it was pointed out to him that the Dura-Line deal came out of the blue — “it was a fast deal,” he conceded — he replied that “I don’t think you should expect any big surprises” in the near future.