CLEVELAND - Primus Venture Partners, Bessemer Holdings L.P. and former BFGoodrich Co. President John Lauer have compiled $250 million in equity and plan to spend as much as $1 billion to establish a major chemical company in Cleveland. The partners are studying eight companies as possible acquisitions and have looked at more than 20 companies to date, Lauer said last month.
``I would say we'll have to go through 50 or more of these before we find the right one to serve as a platform on which to build,'' he said.
Lauer said he hopes to close the first acquisition soon, but will not let his enthusiasm stand in the way of thorough due diligence.
``A lot of this is timing, and timing sometimes takes luck,'' he said. ``If we had something done by the middle of this year, I'd be real happy. If we've got something done at the end of the year, that'd be OK. If we're still looking a year from now, I'll be very disappointed.''
James Bartlett, managing director of Cleveland-based Primus, said the group could buy a company with annual sales of as much as $2 billion. However, Bartlett said it is more likely that the group will start smaller, then make other acquisitions to build sales.
Lauer said most companies he has been shown by investment bankers have annual sales of $100 million and $300 million.
The group mainly is looking at nonrubber- and nonpaint-oriented chemical companies, including those that make additives and ingredients for plastic compounds, Lauer said. The group may consider companies that provide environmental services and equipment to the chemical industry, he said.
Lauer, 56, said he resigned last year as president and chief operating officer of Goodrich because he wanted a chance to run his own business.
After he announced he was leaving, Lauer said he was contacted by executive search firms that wanted him to hold the No. 2 spot at some other companies. However, he was not interested.
``I would have gone somewhere else to become chairman and chief executive officer, but nobody was offering that,'' Lauer said. ``We're going to go out and buy a company so I can be that.''
Primus' Bartlett said his firm will invest in the endeavor a substantial portion of the $74 million venture capital fund it raised last year.
Mike Rothfeld, a partner with New York-based Bessemer, who works with Lauer's group, declined to comment, referring questions to Bartlett and Lauer.
All three parties will have a stake in the company, Lauer said.
``I'll put up some [money], Primus will put up more and Bessemer will put up even more,'' he said.
Bartlett said the three partners want to invest a ``minimum of $100 million and as much as $250 million'' in the venture.
The amount depends upon the size of the acquisitions Lauer finds.
``There's the possibility, on the conservative side, of doing a purchase of from $300 million up to $1 billion,'' Lauer said.
The group has lined up potential lenders in New York, he said.
Bill Ridenour, an investment banker at the Cleveland-based Transaction Group, is among the observers who likes Lauer's chances for accomplishing his goal of running his own show.
``John Lauer's reputation from 30 years in the [chemical] industry has been as a builder, and that's clearly his plan here - to buy a strong business and add viable businesses to it,'' Ridenour said. ``I think he can implement it.''
One company Lauer has approached is Synthetic Products Co., a Cleveland-based maker of specialty chemicals. Synthetic Products' parent company, London-based Cookson Group plc, is trying to sell Synthetic Products along with other subsidiaries in a single transaction, said Synthetic Products Chairman Tom Jennings.
Jennings said he had spoken with Lauer's group about a possible deal, but that no talks were proceeding.
According to Bartlett, he and his partners were told that Cookson was negotiating with another buyer. He said the partners no longer are pursuing Synthetic Products.
Aside from scouring northeast Ohio, Lauer said he has been looking at companies in California, Nevada, Colorado, Louisiana and Europe. Lauer said he plans to locate the company's corporate headquarters in the Cleveland area.
While at Goodrich, which is based in Bath, Ohio, Lauer played a big role in organizing the company's divestiture of its rubber business and the spin-off of its Geon vinyl resins manufacturing company in a 1993 public offering.
Lauer continues to be compensated by Goodrich. He was paid $866,000 in 1994 and is to be paid $508,000 this year, according to Goodrich's 1995 proxy statement.
He also could receive as much as $507,000 in 1996, depending on his employment status that year.
Before his stint with Goodrich, Lauer spent 23 years with Celanese Inc. in New York, and with Hoechst AG of Germany, which bought Celanese in 1986. He served as president and chief operating officer of the specialty chemical group for Celanese and then was president of Hoechst's worldwide thermoplastic engineering division.