UCB Films plans to expand its cellulose film business by acquiring certain assets of financially troubled Flexel Inc. of Atlanta.
A key part of the deal is Flexel's Tecumseh, Kan., cellulose film facility, which will be UCB's fourth worldwide. The Tecumseh plant is mothballed now, but when UCB starts it up, the Wigton, England, company expects the facility to boost its global cellulose capacity to about 132 million pounds per year. UCB has cellulose film plants in Wigton and Bridgewater, England, and in Spain.
UCB proposes to buy Flexel for $6.9 million in cash, plus forgive about $24 million in debt. Flexel filed for protection under Chapter 11 of the U.S. Bankruptcy Code on Oct. 22, 1996.
U.S. Bankruptcy Court in Atlanta gave preliminary approval to the sale June 24. Bankruptcy Judge Robert E. Brizendine has set aside July 17 and 18 for a final ruling on the UCB and Flexel agreement, Flexel lawyer Charles E. Campbell said in a June 25 telephone interview.
UCB spokesman Max Thomas said the company aims its cellulose film products at specialty markets such as candy and dried fruit wrap, condiment laminations and industrial uses such as membranes in nickel-cadmium batteries and mold releases for rubber and plastic composites processing.
Biaxially oriented polypropylene and other plastic films have grabbed most of cellulose's market share in high-volume packaging applications. Flexel lost more than $14 million on sales of $90 million in 1996. Sales the previous year were $122.4 million.
Thomas said key cellulose film properties include heat stability similar to polyester films and good printability. He said Flexel also has an operating cellulose film plant in Covington, Ind., that was not included in the deal. Thomas said UCB plans to buy output from Covington for at least three months, and perhaps longer, as it shifts supply from its other plants.
Thomas claimed the Tecumseh facility was one of the most advanced in the world when it ran at its peak capacity about eight years ago. UCB will introduce metallized, white-pigmented and colored grades of film to the U.S. market when the plant resumes production, probably by the end of the year.
Flexel mothballed the plant about 10 months ago. At the recent court hearing, UCB was granted access to the plant to review the equipment.
UCB bought about $24 million of Flexel's debt in February from Flexco, a venture capital fund in New York, according to Campbell. It paid an undisclosed price for the debt. Unsecured creditors, owed about $33.2 million, could get about 15 cents on the dollar if the Flexel sale is approved. Two partnerships headed by Flexel President W. Lindsey Walters and J.B. Brooks, executive vice president, will own the Covington plant if the deal is approved.
UCB expanded in cellulose film last year when it bought Courtauld plc's Cellophane businesses based in Bridgewater. UCB Films also makes BOPP film for packaging, labeling and security products in Wigton, and recently announced a plan to make specialty BOPP film for bank notes in Melbourne, Australia. The Melbourne plant, due to begin operating in about a year, will boost UCB Films' total film capacity to about 242 million pounds annually.
UCB Films is part of Union Chemique Belge of Brussels, Belgium. The Tecumseh operation will be called UCB Cello Inc. and will receive sales and technical support from UCB Films Inc. of Atlanta. Flexel was a distributor of UCB's BOPP films in North America.