HOUSTON — Rumblings from some heavy-hitting public companies — Fibreboard Corp., Owens Corning and Jannock Ltd. — signal there is no end in sight to the major consolidation now reshaping the vinyl building products industry.
All three have opened their purse strings to buy vinyl products makers. Most of the action has involved siding extrusion and window fabrication. Recent comments in interviews and announcements make it clear more acquisitions are coming:
Fibreboard announced in December it has more than $200 million available to fund acquisitions. A week later, the Dallas company paid $14 million for two Florida vinyl and aluminum window plants and 10 distribution centers from Gentek Building Products Inc.
Toronto-based Jannock, like Fibreboard, grew by acquisition to become a major force in vinyl siding. Jannock's biggest siding buy came in 1995, when it bought the Bird Corp. siding plant in Bardstown, Ky. Jannock then got into window fabrication, buying Bird's Kensington Windows Inc. plant in Leechburg, Pa. Now officials say they want to buy more window fabricators.
Best known for its insulation, roof shingles and composites products, Owens Corning made its move into vinyl in 1995, when it introduced a line of vinyl siding. Owens Corning also purchased a St. Louis window fabricator, Delsan Industries Inc. The company does not disclose who extrudes its siding or window profiles.
``There are a lot of public companies out there that have a lot of money right now. The financial markets are very willing to invest,'' said Gary Acinapura, Jannock's executive vice president of windows. Construction has been strong the past several years, avoiding its traditional boom or bust cycles.
Basic mass production seems to be driving the consolidation in siding, a continuous manufacturing process.
``There's just some fundamental economic forces that say you have to get big to stay competitive. So what you have is an industry that had perhaps 30 participants five years ago, and now there are five sizable players,'' said John Roach, chairman and chief executive officer of Fibreboard.
Window fabrication is different. The sector always has been very fragmented, with more than 500 small companies, called fabricators, that buy extruded profiles and form them into finished windows. But big companies started buying up fabricators about two years ago, and the trend shows no signs of slowing, industry officials said.
``This is probably the most active consolidation I can remember seeing, and I've been in the racket for 20 years,'' Acinapura said.
Several window executives at the Houston Builders' Show in late January said small fabricators simply cannot afford new technology, so many founders are opting to sell.
In 1981, Ralph Delman founded Great Lakes Windows Inc. in Toledo, Ohio, with a $200,000 investment that bought saws, routers and other simple equipment.
``Today you could spend $200,000 for a welder and a basic cleaning machine,'' Delman said. ``The price of poker keeps going up.''
Kenneth Silverman, president of Silver Line Building Products Corp., a major vinyl window extruder and fabricator in North Brunswick, N.J., said a modern corner cleaner can cost $100,000.
North East Windows, a family-owned fabricator in Merrick on Long Island, N.Y., got into vinyl extrusion in 1980, buying a few used extruders to start Quality Lineals in nearby Freeport. The company now has 12 new Davis-Standard extruders, with two more on order. Window sales are about $20 million, said North East President Jeffrey Kaiserman.
Kaiserman said small-firm owners sometimes balk at taking loans for major investments.
``You're always pushing to get bigger and bigger because you have to compete against the big boys,'' he said.
Meanwhile, regional players are struggling to compete against new mass retail channels of distribution, according to Carl Slocomb, president of Acro Extrusion Corp. of Wilmington, Del.
``The medium-sized fabricator does not have access in many cases to the big-box retailers, the Home Depots,'' Slocomb said.
Jannock's Acinapura thinks that midsize fabricators, those with sales of $15 million to $25 million, are most likely to get gobbled up.
``The ones in the lower end of the tail are going to have to find a very specific niche in the market and stick to that diligently, and keep their cost structure under control, or they're going to go out of business,'' he said.
Delman, who sold Great Lakes Window in the late 1980s to Ply Gem Industries Inc. of New York, draws parallels to what happened in the wood industry.
``Every city used to have its little fabricator of wood windows,'' he said. ``We're seeing now the same thing in the vinyl window industry. The smaller ones can't survive.''
Small certainly was not the image Owens Corning presented at the Houston Builders' Show, where the Pink Panther mascot towered over its booth.
Glen Hiner, Owens Corning chairman and chief executive officer, said more vinyl acquisitions could be coming.
``We're very happy with the [Delsan] acquisition,'' Hiner said. ``Quite honestly, we would like to continue to fortify our window position and our siding business, and should the right opportunities present themselves in vinyl products that fit with our `system thinking' strategy, we would be very interested in that type of transaction.''
Promoted by heavy television and magazine advertising, system thinking pitches Owens Corning as a full-service supplier of home building products. It has become the center point in Hiner's well-publicized goal to reach $5 billion in sales by 1999 — pushed up a year from his original pledge. Owens Corning reported 1996 sales of $3.8 million, a 5.5 percent increase from $3.6 million in 1995.
Demand for its vinyl windows has prompted the company to add vinyl fabrication to its pultruded window plant in Martinsville, Va.
Hiner said the company also is buying vinyl windows from a fabricator based in Washington state, which he did not identify.
Owens Corning has grown quickly in new sectors before. Hiner, the former GE Plastics head who joined Owens Corning in 1992, expanded into foamed polystyrene insulation by purchasing Falcon Manufacturing of Michigan, UC Industries Inc. and UC licensees in England and Canada.
``By the end of '97, we're going to have about a $300 million styrenics business,'' he said.
Owens Corning brings a strong brand identity to a diverse stable of products.
``The world has enough one-product-at-a-time kinds of people,'' said Tom Seymour, vice president and general manager who oversees windows, siding, PS foam and house wrap.
Fibreboard's Roach thinks the acquisition spree is fueled in part by a desire to offer a full line of products.
``You need either a brand name or you need access to distribution,'' he said.
Unlike competitors, Fibreboard controls its distribution, picked up when it acquired Norandex Inc., with a large vinyl siding factory in Claremont, N.C., in 1994. Roach said the number of company-owned distribution centers should increase this year to 140 from 124.
``We are our customer. We are the distributor. So we don't need to impress ourselves,'' he said.
Fibreboard also bought siding extruder Vytec Corp. of London, Ontario. The company also makes cast stone products and industrial pipe insulation, and sells vinyl windows acquired from an outside vendor. Sales totaled $469 million in 1996.
In just three years, Fibreboard has sold its lumber mills and California ski resorts to focus only on building products. When the resorts were sold in December, Roach declared that Fibreboard had ``over $200 million immediately available to fund our acquisition program.''
But Fibreboard also is growing by building capacity. Its fourth siding plant will begin operations this year in Joplin, Mo.
Roach thinks Fibreboard can grow three times as fast as the overall siding market during the next few years.
ABT Building Products Corp., another publicly held company based in Neenah, Wis., also has taken both approaches. ABT bought an Acton, Ontario, vinyl siding factory in mid-1995 from Canada's Emco Ltd. of London. In January, ABT announced it would open a second siding plant, in Holly Springs, Tenn.
Sometimes expanding internally makes more sense than an acquisition.
``We can build plants for about half the costs to buy one,'' said Bill Adams, executive vice president of ABT's Exterior Products Group.