St. Louis-based Esco Electronics Corp. is plunging into injection molding and thermoforming, while lessening its reliance on defense industry markets through its purchase of Schawk Inc.'s plastics group for about $92 million.
The firms said they expect the Dec. 18 deal — for cash plus working capital adjustments — to close by mid-February.
``Plastics is totally different than our core'' in imaging and information technologies, David A. Schawk, president and chief executive officer, said in a telephone interview from the corporate office in Des Plaines, Ill.
The deal allows Schawk to ``reduce leverage and free up liquid assets to pursue imaging business opportunities that historically have been more profitable,'' said John Walthausen, securities analyst with C.L. King & Associates in Albany, N.Y.
``They made progress in improving Filtertek, but probably found it more difficult to get a good return on that business than they expected.''
Schawk's plastics group, based in Hebron, Ill., employs 1,025. The unit accounted for 1995 sales of $75 million and has ``more than a dozen new products in the pipeline,'' according to Ronald J. Kay, who will remain group president.
Schawk reported 1995 profit of $6.9 million on sales of $172.3 million.
Operations will continue at current locations.
``Esco is getting six world-class manufacturing facilities,'' Schawk said, referring to four Filtertek and two Tek Packaging sites.
Schawk's major move into plastics occurred in September 1992, when it acquired 61 percent of Filtertek Inc., a publicly held maker of plastic parts for automotive and health-care applications, for nearly $60 million. Schawk took on debt, contrary to its usual cash-only practice.
As of Jan. 1, 1995, Filtertek merged with Schawk, and Schawk Inc. became the listed company on the New York Stock Exchange.
Filtertek occupies 278,000 square feet and operates 215 injection molding presses with clamping forces of 30-700 tons in Hebron, Ill.; Patillas, Puerto Rico; County Limerick, Ireland; and Plailly, France. The Irish site has 35 machines, and 22 operate in France.
Filtertek designs and manufactures filtration devices using insert injection techniques.
Earlier, Schawk acquired the Tek assets, buying a supplier of visual packaging products for the consumer products industry in Huntley, Ill., in 1984, and a supplier to the health-care and electronics industries in Stockton, Calif., in 1990. Together, the two sites operate 16 thermoforming machines and occupy 192,000 square feet.
Schawk expects to take a $33 million charge, or $1.65 per share, from the sale of the discontinued plastics group to cover goodwill and estimated tax liabilities.
Schawk ``learned the dangers of making acquisitions,'' said Lee McMillan, senior investment analyst with the partnership Marksmen Management and Research in Northbrook, Ill. ``Now, I feel better about recommending Schawk stock to potential investors.''
Schawk bought ``old technology'' at Filtertek, McMillan said, but the firm invested ``time and money to get it in a respectable shape.''
In an unrelated transaction May 1, Schawk divested its Plastic Molded Concepts Inc. unit in a management buyout. The injection molder makes precision components in Eagle, Wis., and formerly reported to Schawk's plastics group.
``It has been great experience to have a business that had companies outside the U.S. and to deal with those marketplaces,'' Schawk said.
The firm may expand into those markets with its remaining service and consulting operations in imaging and information technologies, now in 11 U.S. locations and employing 850.
The CEO's father, Clarence W. Schawk, founded the company in 1953 as a small platemaking venture. He continues as chairman of the board.
In 21 years, the firm has acquired and integrated more than 25 businesses.
Esco Electronics employs 2,400, manufactures defense and commercial systems and products and reported profit of $26.1 million on sales of $438.5 million for the fiscal year ended Sept. 30.
In a step to reduce reliance on defense business, the company sold its Hazeltine Corp. unit July 22. Acquiring Schawk's plastics group will give Esco more commercial than defense sales for the first time in its history.
Esco, a 1990 spinoff from Emerson Electric Co., has invested in filtration products, acquiring Textron Inc.'s filtration systems in Newbury Park, Calif., in 1992 and Schumacher Filters Ltd. in Sheffield, England, in 1993.
The California subsidiary, PTI Technologies Inc., occupies 144,600 square feet and makes aerospace and fluid power products for heavy hydraulics, chemical processing and ultrafine filtration, according to Mike Conway, president.
In one niche, Eastman Chemical Co., DuPont Co., and Far East textile companies use PTI's stainless-steel filters to make polymer fibers.
Also, Conway oversees the English operation, PTI Technologies Ltd., which occupies 30,500 square feet and makes industrial filters for use in batch processing, oil refineries and purification of large volumes of liquids or gases.