In a deal with major implications for the North American rotational molding industry, the European parent of Bonar Plastics Inc. is negotiating to buy Rotonics Manufacturing Inc. Executives at both companies - both of which are publicly traded - stressed the deal has not been completed.
``It's letter-of-intent stage as opposed to a finalized deal,'' said Jim Heilig, chief executive officer of Low & Bonar.
A decision on whether to proceed with the transaction is expected by the end of March.
Both companies made the top 10 in Plastics News' first ranking of rotomolders, published last year. Bonar Plastics of Newnan, Ga., had sales of $40 million in its fiscal year ended Nov. 30, 1994. In its fiscal year ended June 30, 1995, Rotonics, based in Gardena, Calif., reported sales of $35.5 million and earned a pre-tax profit of $3.5 million, according to an announcement about the purchase talks issued by Bonar's parent, Low & Bonar plc of Dundee, Scotland.
Bonar was No. 4 on the Plastics News ranking. Rotonics, also known as RMI, was No. 7.
If the deal happens, the combined companies could vault up to second place in the sales-based ranking, behind only the big molder of toys, Little Tikes Co. of Hudson, Ohio.
Heilig and Sherman McKinniss, RMI's president and chief executive officer, said the deal is subject to approval by U.S. regulatory bodies. Also, Rotonics' shareholders might have to approve a deal, depending on the type of agreement that results, they said.
Together, the companies would have 13 factories and more than 700 employees throughout North America. Broad geographical distribution of plants is important in rotomolding, especially for reducing shipping costs of large tanks. The industry has been consolidat-ing the past several years, although most of the action has involved the acquisition of small companies, not giants such as RMI.
According to Low & Bonar's Feb. 19 statement, the company has reached an agreement in principle with Rotonics to buy all outstanding shares at $2.34 per share.
That would place the value of Rotonics at about $33 million, according to Low & Bonar. Rotonics is traded on the American Stock Exchange.
Rotonics stock has been trading at around $2 per share this year.
Low & Bonar stock is traded on the London Stock Exchange. At the same time it announced the talks with RMI, Low & Bonar also issued its financial results for its fiscal year, which ended Nov. 30.
The company had 1995 sales of $665 million. Pre-tax profit was $82 million.
Rotational molding generates about 15 percent of the profit at Low & Bonar, according to Heilig.
The Scottish company's biggest business segment, packaging, accounts for more than half of its profit. About one-third of profit comes from industrial carpeting, yard and fabrics and geotextiles.
North American operations generated 28 percent of the company's sales and 24 percent of its pre-tax profit, in 1995. European operations accounted for the rest.
Rotonics employees work on a mold for a polyethylene tank.