Cincinnati Milacron Inc. will spend $260 million to buy D-M-E Co., propelling the largest U.S.-owned maker of injection molding machines into the business of standard mold components, such as mold bases and hot-runner parts. Harold Faig, vice president of Milacron's Plastics Machinery Group, said in a statement issued Nov. 13 that Milacron will run D-M-E as an independent, stand-alone unit. D-M-E has annual sales of $175 million.
Told last week of the news, competitors wondered if Milacron intends to one day make complete mold systems to go with its presses - a move that would put Milacron squarely in the path of Canada's Husky Injection Molding Systems Ltd.
A Milacron spokesman confirmed that could happen. The D-M-E purchase ``will fit very nicely into our plans for that area. That seems like a logical extension,'' said Tom Jarrold. He said the acquisition ``puts us in a prime position to be able to sell complete systems.''
That approach would make sense, said officials of injection press makers Engel Machinery Inc. and HPM Corp.
``The only reason I would see a real benefit to Milacron, other than having a stable expansion of their business, will only be if they turn it into a mold-making operation in the long haul,'' said Kurt Fenske, vice president of sales at Engel of York, Pa.
The blockbuster acquisition fits with the steady growth over the years into plastics machinery by Milacron, which also makes metalworking equipment, said William Flickinger, president and chief executive officer of press maker HPM Corp. of Mount Gilead, Ohio. His main question is: ``Do they intend to compete more directly with Husky where they integrate more of the tooling with the machinery or are they going to truly keep [D-M-E] as a separate function?''
Mike Urquhart, vice president, service and sales Americas for Husky, said, ``Husky specializes in molds for the packaging market, which represent only about 5 percent of the overall mold market. Clearly, there is a very large mold-making market available to any qualified mold maker.''
Milacron's news release quoted Daniel Meyer, chairman and chief executive officer of the Cincinnati company, who said: ``We're paying a fair price for a highly profitable operation with a strong management team.''
Meyer said D-M-E had some attractive features.
``D-M-E is a business that - in contrast to machinery - has less-severe cycles, faces limited import competition and historically has excellent cash flow,'' he said.
Milacron signed a preliminary agreement to buy D-M-E from Fairchild Corp. of Chantilly, Va.Both companies are traded on the New York Stock Exchange.
Initial financing will come froma combination of a short-term note to Fairchild and cash. Milacron officials said they expect to set up longer-term financing eventually. The deal is expected to close in early 1996.
Milacron, which expects total 1995 revenues to top $1.6 billion, picked up $105 million in spending money by selling its Electronic Systems Division, which makes controls for its plastics machinery and machine tools. In a deal announced Sept. 28, Milacron sold ESD to the Vickers unit of Trinova Corp. of Maumee, Ohio.
D-M-E, based in Madison Heights, Mich., is widely recognized as the dominant U.S. maker of standard mold bases. D-M-E officials could not be reached for comment.
D-M-E employs 1,000 at seven manufacturing facilities in the United States, has two facilities in Europe and has joint ventures in Canada, Mexico, India and Japan.
Faig said D-M-E will complement Milacron's injection press business.
``And we see good synergies on several key levels, including manufacturing process, technology, geography, marketing and distribution,'' Faig said.
Milacron expects its plastics machinery sales to approach $800 million in 1996, including the D-M-E sales.
D-M-E's seller, Fairchild, is a major manufacturer of products, process equipment and systems for the aerospace and other industrial applications.