Toy and play-ball rotomolder Hedstrom Corp. expects to go public within a few years, after its parent, Hicks, Muse, Tate & Furst Inc., builds the company into a major force in toy making, a top Hedstrom official said.
Hedstrom completed a major acquisition earlier this year by spending more than $200 million to pick up ERO Inc., a major manufacturer of children's products. Hedstrom also has expanded plastics processing at its swing-set factory in Pennsylvania. This fall, the company is opening a new rotational molding facility in Reno, Nev.
Earlier this month, Hedstrom purchased the metal gym set, hockey net and original equipment manufacturing assets of Canada's only major maker of metal swing sets.
The firm, M.A. Henry of Dundas, Ontario, will retain its limited rotomolding business, said James Braeunig, vice president of operations at Hedstrom's plastics division in Ashland, Ohio. Henry has an estimated $10 million in annual sales.
Pittsburgh-based Hedstrom operates its rotomolding headquarters in Ashland. The firm makes balls, rocking horses, swing sets, ride-on equipment and other toys.
Hicks Muse wants to buy more toy companies, said Braeunig.
``Their whole strategy is to buy and build related companies and build a highly profitable, fast-growing company. Once it reaches a critical mass, then they go with an initial public offering,'' Braeunig said.
Hicks, Muse of Dallas is a private company. Hedstrom was part of a public company, Jepson Corp., in the late 1980s. Hicks, Muse acquired Hedstrom in 1995.
Braeunig said the ERO acquisition ``puts us in the top 10 toy companies.'' Hedstrom had overall 1996 sales of $140 million. ERO sales were $158 million.
Hedstrom's rotomolding sales are $43 million, good for 6th place on Plastics News' ranking of North American rotomolders.
Size is important to survive in today's toy wars. ``As the retailers shrink, they become more powerful,'' Braeunig said. ``Small companies just can't get the pricing they need to. They don't have the ability to do just-in-time deliveries and the computerization of orders. It's just difficult to compete in that marketplace.''
ERO also brings Hedstrom its first injection molding capacity. ERO's Amav Industries subsidiary in Montreal runs more than 40 injection presses, with clamping forces as great as 1,500 tons, said Yoav Benor, Amav vice president.
Amav makes free-standing games for children, such as pool tables, air hockey games and table tennis sets. Amav also makes battery-operated ride-on cars and craft and activity toys, Benor said. ERO is based in Mount Prospect, Ill.
Hedstrom was diversifying its plastics processes even before buying ERO. In the plastics industry, Hedstrom is best-known for its large rotomolding factory in Ashland, which turns out an endless stream of play balls.
Hedstrom assembles its swing sets — combinations of plastic, metal and wood components — at a factory in Bedford, Pa. That plant mainly did metal bending, buying some plastic parts from outside vendors, and getting its rotomolded parts from Ashland. But Hedstrom has invested about $10 million in the past three years to add blow molding, extrusion coating and rotomolding
``Mainly they had been a metal fabricating shop — tubing and stampings and painting, things like that,'' Braeunig said. ``Originally, the gym sets and bikes and trikes were all metal. As they changed to more plastics, they still were buying a lot of plastic parts from the outside. Now they're bringing it back inside.''
New equipment at Bedford includes three blow molding machines from Graham Engineering Corp., an extrusion coating line to coat chains for the swing sets, and a Ferry Industries 280, four-arm rotomolder.
Hedstrom added the independent-arm Ferry machine at the Pennsylvania factory to handle work from the line of Wonder Horse rocking horses. Hedstrom bought the Wonder Horse molds and product line earlier this year from Rotocast International Inc. of Miami.
Hedstrom used to rotomold and paint the horse bodies in Ashland, then ship them to Bedford where workers added the springs and frame during final assembly. Now Hedstrom has moved all rocking horse rotomolding to Bedford.
Hedstrom also is opening a 40,000-square-foot Reno rotomolding factory in September. Braeunig said the plant will contain two rebuilt McNeil rotomolders.
The company also runs rotomolding factories in Dallas and Dothan, Ala.
Both Hedstrom and ERO are strong in the licensed-products category. Hedstrom has focused on licensed play balls for popular children's movies and television shows from Disney, Warner Bros. and others. ERO makes licensed products such as sleeping bags, backpacks and water sports items.
ERO will help round out Hedstrom's business over the entire year. Hedstrom's balls and swing sets sell from January through June, while ERO business picks up the second half of the year, Braeunig said.
Under terms of the agreement, Hedstrom paid about $123 million for ERO and assumed debt of about $80 million.
Braeunig said the deal dwarfs other Hedstrom acquisitions, which typically have been for less than $10 million.
Consolidation seems inevitable in the toy business.
``It's a tough industry,'' Braeunig said. ``You need a very large research and development department, because products can be hot one minute and dead the next. You need to constantly have new products coming out at all times. I don't know that these small toy companies, without the backing of a large company, can compete in that marketplace.''