Proprietary plastic product manufacturers Summa Industries and Calnetics Corp. are moving toward merger again.
The California-based holding companies mutually terminated a previous effort May 7, but the principals kept talking and announced a new deal July 2.
The definitive agreement calls for the cash merger of Calnetics with a new subsidiary of Summa for $22.3 million, equal to $7.35 per share for Calnetics' common stock. As of June 30, Calnetics of Chatsworth, Calif., had 3,038,799 shares outstanding and closed at $5.72 per share July 2 on the Nasdaq market.
``We jointly terminated the prior agreement because the stock market had changed dramatically and made it unfavorable on both sides,'' said James R. Swartwout, 51, Summa chairman, president and chief executive officer. ``The fundamental reason for the combination remained the same. We just worked out a different structure.''
Under the previous March 26 definitive agreement, Calnetics holders would have exchanged shares for a combination of cash, debentures and Summa common stock.
The new deal depends upon Calnetics rendering a favorable fairness opinion, its shareholders' approval and Summa's financing arrangements.
``We're in a good market for raising capital,'' Swartwout said in a recent telephone interview from Summa's Torrance, Calif., headquarters.
Swartwout estimated the entry level to the midsize market for a public company at annual sales of $100 million. He noted, ``This is a good step toward that level.''
Swartwout said his objective is to ``consolidate at the holding-company level and not disturb operating markets.'' He sees Summa as poised for more acquisitions.
Summa injection molds plastic parts for the lighting, materials-handling, fire-fighting equipment and defense aircraft industries through units with facilities in Charlevoix, Mich.; Dixon, Tenn.; and Rancho Cordova and Santa Ana, Calif. The firm employs 375 and had net profit of $1.5 million on sales of $29.7 million for the nine months ended May 31.
Clinton G. Gerlach, 71, Calnetics chairman, CEO and 40 percent owner, said he plans to leave after the transaction closes in a few months. But, he added that he may invest elsewhere: ``I have to look at various business ventures,'' he said.
Gerlach bought into Calnetics in 1988. During the past eight years, both sales and per-share profit for the firm have grown at compounded rates of 35 percent; profit has grown by 43 percent.
Calnetics molds plastic bobbins, components, filters, fittings, and extrudes sheet and tubing for industrial, building-material and agricultural-irrigation applications, at facilities in Chatsworth, Ontario, and Corona, Calif. The company employs 240 and reported net profit of $1.3 million on sales of $26.3 million for the nine months ended March 31.
The deal was easier this time around because the firms already know each other, Gerlach said.
``A lot of the working and representation was all done,'' he said.
