ICO Inc. plans to acquire Wedco Technology Inc., a custom grinder of plastic pellets and other materials, for about $56 million in cash and stock. Wedco stockholders will receive $5.71 in cash and 1.8 shares of ICO stock for each share of Wedco common stock held. ICO stock closed Aug. 15 at 5 7/16 on the Nasdaq market, putting its total value for Wedco stockholders at $35 million.
The firms are conducting due diligence, and expect to seal the deal by year's end, according to Robert F. Bush, Wedco's vice president of finance. Wedco has been seeking a buyer for several years, Bush said by phone from the firm's West Portal, N.J., headquarters. Talks with ICO began about six months ago.
Houston-based ICO tests, inspects and reconditions equipment used in the production of oil and natural gas, such as inground pipes and well heads. The two firms have little in common except their customers, which comprise the major petroleum and chemical producers, Bush said.
Wedco wields about 70 percent of the U.S. market for plastics grinding, according to Bush. He estimated its European share at about 60 percent. Sales totaled about $43.6 million for the fiscal year ended March 31, with profit of just less than $4 million, Bush said. He estimated long-term debt for the same period at ``a little less than $20 million.''
The company's core business is in custom grinding particles - mostly plastics - into granules or powders for firms such as DuPont Co., Shell Chemical Co., Exxon Chemical Co. and A. Schulman Inc. Bush said the growing market for rotationally molded products, especially toys, is boosting Wedco's ground plastics sales.
In addition to plastics processing, Wedco's products are used in paints, and metal and fabric coating. It also pulverizes rubber, and even bones used to produce animal feedstock, he said.
About 10 percent of its business is in manufacturing its own brand of grinding equipment. But most of its customers ``typically source out grinding because it's a small portion of their business,'' he said. Compounding also makes up a very small piece of Wedco's business, Bush said. Three plants, in Houston and in Long Beach and Fontana, Calif., custom compound plastics and some rubber.
Wedco's seven U.S. plants and its European subsidiary, Wedco Europe BV, provide ambient, air milling and cryogenic grinding. It has two joint ventures, WedTech Inc. of Toronto, and Micronyl-Wedco SA, with facilities in Beaucaire and Montereau, France. The Montereau plant houses Wedco's only recycling operation, which processes PET bottles for the French government, Bush said.
ICO officials were not available for comment.
President and founder William E. Willoughby plans to retire once the merger is final. ICO will appoint a new head, but otherwise will retain Wedco's present management, Bush said. The Willoughby family owns about 40 percent of the firm.
About 37 years ago, Wedco began grinding rubber backing from rugs, then branched into other materials. The company went public in 1985.