Gundle Environmental Systems Inc., the leading producer and installer of plastic landfill liners, is acquiring competitor SLT Environmental Inc. in a $71 million deal that would create a globally dominant supplier of HDPE film for environmental applications. ``The fit is tremendous,'' said Gundle Chief Financial Officer Roger J. Klatt.
Publicly held Gundle of Houston announced March 29 it will acquire SLT for stock valued at $37 million and will assume $34 million in SLT debt. The deal, subject to shareholder approval, is expected to close this summer.
Privately held SLT, based in Conroe, Texas, is a unit of Wembley Ltd., a holding company based in the British Virgin Islands. The company has manufacturing facilities in Texas and Germany and installa-tion offices in Texas, Europe,Australia and Singapore.
Klatt declined to discuss market share figures for the combined companies. He did say, however, that Gundle and SLT will represent more than 220 million pounds of high density polyethylene conversion capacity out of a global capacity of 450 million pounds in the landfill, mining, hazardous waste and aquaculture markets.
William P. Reid, SLT chief executive officer, noted that while the combined company will own a large share of HDPE capacity, competitors also supply other plastic resins and lining materials, such as clay, for environmental applications. He said the merger will allow Gundle and SLT aggressively to pursue long-term plans to build new plants in Asia and South America.
``The resources that both companies have will allow us to expand quicker,'' Reid said.
Gundle operates seven blown-film extrusion lines, three net-extrusion lines and a compounding facility. The company produces sheet in thicknesses of 20-140 mils in seamless widths of 221/2 feet and 341/2 feet. Gundle has manufacturing plants in Houston and Spearfish, S.D., and installation offices in Houston and the United Kingdom.
SLT has two extrusion lines, in Houston and Rechlin, Germany, which use flat dies to make sheet in 24-foot widths. It can produce sheet in thicknesses of 30-240 mils, but is most cost competitive in thicker films.
In a January research report, Smith Barney analyst L.T. Young said Gundle's gross profit margins had been squeezed by large price increases in HDPE. Moreover, ``business conditions still remain extremely competitive and the industry appears to be in an oversupply situation at the present time,'' Young said.
Klatt said Gundle was coping with higher resin prices by building larger stocks of raw material and moving toward short-term quotes on jobs. He estimated that Gundle consumed about 120 million pounds of HDPE resin last year.
Following the merger, SLT Chairman and owner Samir Badawi will become chairman of the combined company. Gundle CEO Thomas L. Caltrider will become vice chairman and Reid will become chief executive officer of the new 800-employee company, to be known as Gundle SLT Environmental Inc.