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September 22, 1997 02:00 AM

ISRAEL'S ZAG TO MERGE WITH HOME PRODUCTS

Michael Lauzon
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    An Israeli firm intent on expanding in the competitive U.S. housewares market plans to do so by merging with Chicago's Home Products International Inc.

    Zag Industries Ltd. agreed in principle to merge with Home Products to create a firm with 1997 sales of about $200 million, the companies announced Sept. 18. The new firm would have 10 manufacturing and distribution facilities around the world.

    Zag and Home Products said they plan to open a major manufacturing and distribution facility, probably in the western half of the United States, early in 1998. They target the new plant to be ``the launching pad for an aggressive Zag ramp-up in the United States.''

    Home Products and Zag officials were unavailable at presstime to elaborate on the new plant or other production plans.

    Rosh Ha'Ayin, Israel-based Zag makes plastic consumer products, including hardware, storage and gardening accessories, toolboxes and modular drawer systems. In June, it predicted its 1997 sales would reach $64 million, 27 percent higher than last year's sales.

    Home Products expanded early this year when it completed the acquisition of plastic housewares producer Tamor Corp. of Leominster, Mass., for $41.9 million, including $11.7 million in debt. Its Selfix Inc. subsidiary of Chicago molds self-adhesive hooks, bath accessories and juvenile products. Its Shutters Inc. subsidiary injection molds residential shutters in Hebron, Ill.

    Home Products' sales on a pro forma basis to include Tamor's sales were $31.7 million for the quarter ended March 29, about 16 percent higher than a year earlier. Profit was about $1 million, as compared to a $22,000 loss.

    The two firms plan to pool their interests in a tax-free merger that will give Zag shareholders 52 percent of the new company. Headquarters will be in Tel Aviv, Israel, and Chicago. U.S. sales will account for about 70 percent of the total with the rest spread over 40 markets worldwide.

    Zag Chairman and Chief Executive Officer Zvi Yemini will be chairman of the new company and James R. Tennant, now chairman and CEO of Home Products, will be CEO and president.

    ``Our strength is taking a basic product and finding ways to make it unique and of greater benefit and value to the consumers,'' Yemini said in a news release.

    Zag's design group in Tel Aviv will serve as the new firm's research and development center.

    ``Quite simply, Zvi has shown time and time again that he can build a better mousetrap,'' Tennant said in a news release. The combined firms will have enhanced stakes in current product lines.

    Yemini told Reuters last spring that Zag was starting production in Mexicali, Mexico, to supply U.S. markets, which accounted for about 35 percent of sales. Zag also had plans to manufacture in Canada and possibly New Jersey in the next few years.

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