CIT Group Holdings Co. has expanded its plastics portfolio once more, with the purchase of Elkay Products Inc., a proprietary molder of clinical laboratory products. In a leveraged buyout March 30, CIT's Venture Capital unit acquired 79 percent of the Shrewsbury, Mass., injection molder, according to Kevin Falvey, vice president of CIT/Venture Capital. Exeter Venture Lenders L.P. of New York, CIT's partner in the deal, owns the other 21 percent. The companies bought out the estate of Louis Kane, which owned the firm. The Bank of Boston was senior lender for the transaction, which Falvey called ``a classic leveraged buyout.'' Terms were not disclosed.
Since its founding by brothers Louis and Benson Kane 26 years ago, Elkay has molded proprietary lab products, sold under its own brand name and other, private labels, said Benson Kane, Elkay's chief executive officer. The company also does a small amount of custom work, Falvey said in a recent telephone interview from CIT's Livingston, N.J., headquarters.
Blow molding and some extrusion augment the injection business. At its 80,000-square-foot Shrewsbury plant, Elkay operates 25 presses, four blow molding machines and two extruders, and employs 170. A leased facility several miles away in Worcester provides warehouse space.
In the United States, Elkay has annual sales of about $20 million; overseas it does roughly $5 million a year, Kane said.
A second plant, in Galway, Ireland, has 10 presses and fiveblow molding machines, Kane said. It employs 70.
Elkay's 100 or so disposable lab items are made mainly with polystyrene and polypropylene, and generally are sold through distributors to clinical and research labs, Kane said. The firm makes such items as pipette tips, test tubes, specimen cups, cuvettes, caps, tubing and hematology products.
CIT/Venture Capital is one of eight CIT business units. Lending is the largest part of CIT Group's business. But Venture Capital, founded in 1992, is its acquisitions arm, buying interest in companies across a number of industries, Falvey said.
Elkay is CIT's third plastics holding. CIT also owns 16.6 percent interest in Berry Plastics Corp. of Evansville, Ind., a custom injection molder of rigid containers and aerosol can overcaps for consumer products; and an undisclosed share of Rex-Rosenlew International Inc. of Thomasville, N.C., which extrudes film for industrial, agricultural and stretch-film applications.
Favey said CIT/Venture Capital will use Elkay as a platform for future acquisitions in the laboratory disposables market. In fact, the company currently is wooing one prospect, he said. But he stressed that all Venture Capital's companies are stand-alone investments that run as discrete businesses.
CIT became interested in Elkay through Louis Kane, who ``was looking for financing,'' Falvey said.
``We liked the company. Before we could get anything really discussed, Lou passed away.''
When his brother Lou died in April 1994, Benson Kane stepped in to head the firm.
Both Kane and Favey still see plenty of growing room for Elkay's products. With clinical chemistry becoming more sophisticated, there is opportunity for new kinds of products, Kane said. According to CIT, the global market for disposable plastic lab products is about $300 million and growing at a compound annual rate of more than 6 percent.
Favey said CIT is planning ``an aggressive capital expenditure program'' at Elkay, to pay for new machines, molds and automation.
CIT Group, a $16 million asset-based financing organization, is co-owned by Dai-Ichi Kangyo Bank Ltd. of Tokyo and Chemical Banking Corp. of New York.
CIT/Industrial Financing, also in Livingston, provides loans, leases and other kinds of financing for equipment purchases, including plastics processing equipment.
That unit's Business Development and Economic Research department is known in the plastics industry for its economic outlook studies.