Mitsubishi Chemical America Inc. plans to purchase PW Pipe and its six West Coast plants, in the biggest deal in recent years for PVC pipe extrusion. PW's parent, Simpson Investment Co., announced July 5 that Mitsubishi Chemical America of White Plains, N.Y., has signed a letter of intent to acquire the pipe company. Mitsubishi hopes to complete the deal by the end of July. Mitsubishi Chemical won a bidding contest that began Jan. 12, when Simpson formally put PW up for sale. Terms were not disclosed.
Simpson Investment had owned the Eugene, Ore.-based pipe extruder, formally known as Pacific Western Extruded Plastics Co., since 1967. Simpson said it wants to focus on its core business of wood, pulp and paper products.
New, Japanese ownership of PW Pipe - ranked recently by Plastics News as North America's third-largest plastic pipe extruder - has major implications for the PVC pipe industry, especially in the western United States.
In 1994 PW Pipe generated an estimated $206 million in sales from its six plants in Eugene; Cameron Park, Perris and Visalia, Calif; and Sunnyside and Tacoma, Wash.
The PW plants mark the first U.S. pipe extrusion capacity for Mitsubishi Chemical America and its parent, Mitsubishi Chemical Corp. of Tokyo, according to Ken Fujiwara, manager of Mitsubishi Chemical America.
``We see the U.S. market and the PVC pipe business as promising, kind of stable, and we can expect consistent growthin the near future,'' Fujiwara said in a July 5 telephone interview from White Plains.
Mitsubishi is conducting due diligence studies and preparing government filings to close out the purchase.
Simpson Investment wanted to sell all six plants, rather than break up the business.
``It is the subject of due diligence, but at this point it is planned to acquire all six plants,'' Fujiwara said.
He said it is too early to say whether Mitsubishi will continue to run all six.
Both Fujiwara and James Rash, president of PW Pipe, said Mitsubishi Chemical America is not connected to Mitsubishi International Corp. or Mitsubishi Group, Japan's largest industrial group. Mitsubishi International owns a U.S. PVC pipe extruder, Diamond Plastics Corp. of Grand Island, Neb. The two pipe companies have no business relationship, Fujiwara said.
PVC resin suppliers are watching the deal closely. According to Plastics News data, PW Pipe's capacity is about 350 million pounds, or about 8 percent of the U.S. market for PVC resin going into pipe. Rash and Fujiwara declined to identify PW Pipe's resin suppliers, but industry observers believe the major supplier is Westlake Group of Houston, which purchased two resin plants from PW in 1991. Westlake has its own U.S. pipe extrusion operation.
Fujiwara would say only that, at this point, Mitsubishi Chemical plans to continue sourcing resin from the United States. His company's parent makes PVC resin in Japan, through its subsidiary, Mitsubishi Kasei Vinyl Co. The firm exports some PVC to the United States, mainly to Japanese transplant carmakers and their suppliers.
``They are not really in the pipe [resin] business,'' he said. ``Mitsubishi Kasei has basically nothing to do with this PW Pipe deal.''
Rash declined to say how many firms bid for PW Pipe, or to identify them. But according to industry sources, the following companies submitted formal bids: Uponor US Inc. of New Castle, Del.; Westlake Group of Houston; CanTex Inc. of Mineral Wells, Texas, which is owned by Sumitomo Corp.; and Apache Plastics L.P. of Stockton, Calif.