A California manufacturer of plastic drainage equipment underwent an ownership change Aug. 15 that provides big incentives to employees. ``We've got a clean slate and a bright future,'' said Robert S. Babcock, president and chief executive officer of National Diversified Sales Inc.
The firm has HPM and Cincinnati Milacron machines with clamping forces of 250-700 tons and shot capacities to 165 ounces for injection molding and 30 pounds for structural molding.
``We buy our high density polyethylene, high-impact polystyrene, PVC and some ABS on the spot market from various suppliers,'' Babcock said.
In October, the company closed a 109,000-square-foot plant in Camarillo, moved to lower-cost Lindsay and leased, with an option to purchase, a former General Cable plant on a 19-acre site suitable for expansion. The 121,000-square-foot plant, 31/2 acres of concrete storage space and two railroad spurs occupy the tract. Railroad car deliveries of plastic pellets arrive on one spur, and eventually, finished goods will leave on the other.
Seventy of some 100 employees followed NDS to the small community near Sequoia National Park. NDS operates around the clock, makes more than 600 products and now employs 135.
Owner Trevor Phillips decided to sell his NDS interest after the move, and ready investors were found. Churchill Capital Inc., an investment fund management firm in Minneapolis, and Houlihan Lokey Howard & Zukin, a specialty investment banking firm in Los Angeles, formed a partnership in April 1995, and the firm upgraded an existing employee stock ownership plan.
The partnership, Churchill ESOP Capital Partners, invested $5.5 million, provided other considerations and now, along with employees, owns NDS. The firm loaned funds for the ESOP to buy a 30 percent ownership that will accrue to employees in straight-line vesting over five years.
Employees have no obligation to pay for their shares, and their stock with any reinvested dividends will remain tax-free until they retire or cash out.
The company can deductESOP contributions from its pretax income.
``We liked the industry and think NDS occupies a unique niche in the plastic drainage products category,'' said Robin Howe, a Churchill principal.
Typically, this type of partnership seeks to sell its interest within seven to eight years.
Meanwhile, the partnership will explore additional acquisitions in related businesses, according to Marty Sarafa, senior vice president with Houlihan Lokey Howard & Zukin.
The fund has $190 million to invest and is prepared to help expand NDS.
Formed in 1978, NDS designs and manufactures exterior surface drainage products, including grates, catch basins, valve boxes and channel drains and offers designs that can be installed more easily than concrete or metal alternatives.
NDS operates warehouses in Atlanta, Dallas, Philadelphia, Seattle, Toronto and San Juan, Puerto Rico.