TORONTO - Royal Plastics Group Ltd. plans to double the size and expand the geographic base of its vinyl window blind business by acquiring Novo Industries Inc. of Houston. Royal announced Oct. 16 that it agreed to pay about US$63 million for Novo in cash and subordinate voting shares of Royal. It expects to conclude the deal by Nov. 30.
Novo's annual sales are about US$52 million, said the firm's President Masoud Ladjevardian in a telephone interview. Its sales are slightly larger than Royal's vinyl blind sales, Ladjevardian said.
``The Novo acquisition will provide Royal with a broader window blind product line and distribution into new geographic market segments, including areas in Europe,'' said Vic DeZen, Royal's chairman and president, in a news release.
Brad Smith, an analyst with Midland Walwyn Capital Inc. of Toronto, said the purchase price seemed high but ``it makes sense for a strategic move.''
Novo's main plant is a 300,000-square-foot facility in Houston with 26 profile extrusion lines and compounding capacity. It supplies commercial, residential and mass merchandise markets and has distribution facilities in California, Florida, Illinois and New Jersey.
The company's Novo Europe BV subsidiary has been producing vinyl blinds in Amsterdam, Holland, for about two years. The 9-year-old private firm is owned by management and employees.
Royal's vinyl blind business has eight facilities in Quebec, Ontario, Florida, California and Mexico. Its main subsidiary in the blind business is Plastibec Ltd. based in the Montreal suburb of Boisbriand. Royal extrudes blind profiles, injection molds blind hardware and valances and supplies related metal components.
When Royal went public in late 1994 it estimated it had about 25 percent of the North American vertical blind market and estimated its blind sales at about C$60 million (US$44.4 million) for the year ended Sept. 30, 1994. Ladjevardian said the combined Novo and Royal blind businesses will be the largest of the half dozen or so majors in North America. He expects the vinyl blind merger to result incost savings and should boost each operation's profitability.
Ladjevardian said vinyl blinds are capturing market share because new vinyl technologies provide economical, aesthetically pleasing products that are easy to clean. Royal estimated a year ago that vinyl blinds had about 20 percent of North America's total window covering market of C$1.4 billion (US$1 billion) per year.
Royal's common share price fell C$0.25 (US$0.19) to close at C$18 (US$13.45) on Oct. 17 on the Toronto Stock Exchange.