In a move to expand its geographic and market reach, compounder M.A. Hanna Co. is buying Cimco Inc. of Costa Mesa, Calif., for about $34 million. When the deal is complete, Hanna will own Cimco's profitable compounding unit, and Cimco founder Russell T. Gilbert will buy the custom injection molding unit, which again will be a privately held company.
In the Nov. 8 announcement, officials of M.A. Hanna, a Cleveland-based specialty chemicals company, said terms of the agreement call for the acquisition of all the outstanding capital stock of Cimco for $10.50 per share. The cash purchase is to be completed by the end of this year or in early 1996.
Cimco's business consists of Compounding Technology Inc. (CTi), a custom compounder of engineering resins in Corona, Calif., and a custom injection molding operation with plants in Costa Mesa and Dayton, Nevada.
Hanna's primary interest in acquiring Cimco is the company's compounding division, which specializes in engineering compounds with an emphasis on polycarbonate resins for the appliance, electrical/electronics equipment and business machine markets.
CTi, formed in 1980, had sales of $44 million in fiscal 1995 and employs 95. In addition to the Corona facility, it has plants in Charlotte, N.C., and Singapore, and is completing a plant in France.
The Singapore plant will be Hanna's first Asian venture. Douglas J. McGregor, Hanna's president and chief operating officer, said the company plans to ex-pand its Asian operations, particularly in China and Malaysia. The acquisition also gives Hanna production facilities on both the East and West coasts of the United States.
CTi's heavy focus on polycarbonate compounds for the electrical/electronic equipment markets will help Hanna balance its market portfolio. In 1994, 22 percent of CTi's sales were to Hewlett-Packard Co.
``[CTi] is significantly stronger in those markets [than Hanna], since a substantial part of CTi's business resides in those markets,'' McGregor said in a telephone news conference.
Hanna's revenues in those markets grew from 4 percent in 1993 to 12 percent in 1994.
Cimco's compounding business has been healthy and profitable with a good high-growth profile, Hanna officials said. They noted however, that ``the other side of the house [custom molding] has had difficulties.''
Cimco's stock fell to a 52-weeklow June 29, trading at 33/8. On Nov. 7, its stock on the Nasdaq closed at 85/8, and opened Nov. 8 with an asking price of 101/4. Cimco had lost money for the past two years.
Hanna has received an offer from Gilbert, Cimco's president and chief executive officer, to buy the injection molding operations from Hanna promptly after it acquires Cimco. However, that sale is not a condition of the Cimco acquisition.
Gilbert said in a telephone interview that the decision to sell the entire company to Hanna and buy back the molding business has certain advantages over simply selling CTi.
First, the shareholders receive $10.50 per share. Second, Hanna, when it takes over the whole company, will retire all the bank debt.
Gilbert said the only debt he anticipates carrying is the industrial development revenue bonds on the plant in Nevada.
There also are tax concerns, and the deal is a way of taking Cimco private, Gilbert said. He took the company public in May 1986.
When the transaction is complete, Cimco's molding business will be at $35 million in annual sales with 233 employees in Southern California and 59 in Nevada. Cimco operates 25 large-tonnage presses in Nevada, and 51 presses in Costa Mesa.
In mid-September, Cimco consolidated its medical molding operations from a building across the street into the main Costa Mesa facility.
The company still owns the former medical molding building and Gilbert said no decision has been made about the future of that facility.
Gilbert said Cimco has turned the corner to putting the molding business back in the black. The unit has been restructured in the past six months, and now has some major new molding projects coming on line, he said.
Cimco's molding operations are back to a three-shift, seven-day operation, a sign that it will return to profitability during its first quarter as a private company, Gilbert said.
As to the CTi acquisition, Gilbert said, ``With the financial strength of Hanna behind them, the synergy of Hanna's worldwide marketing along with CTI's strong market presence, it's a beautiful fit for Hanna with their strategic plans for growth, and for CTi's as well.''