Cabec Energy Corp. plans to acquire a stake in Plastic Pallet Productions Inc., a recently formed pallet injection molder.
The two companies, both based in Dallas, expect to finalize the deal by the end of the year, they announced Oct. 13. Cabec agreed to acquire 23.5 percent of Plastic Pallet in a stock swap. Officials did not reveal other terms of the agreement.
Michael John, a German inventor, bought Dray Manufacturing out of receivership about a year ago, he said in a telephone interview.
Plastic Pallet is using the former 139,000-square-foot Dray facility to make modular pallet components from high density polyethylene.
Plastic Pallet has several presses in the 850- to 1,200-ton range and its own machine shop. John said his firm also is building its own two-clamp injection press.
Plastic Pallet recently bought 87 acres of land in Bay City, Texas, to build a second pallet-molding plant. Ralph Curton, Cabec chairman and chief executive officer, said the facility probably will begin production in early 1999. The site is near a Chevron Chemical Corp. facility, one of Plastic Pallet's HDPE suppliers.
John said his pallets are based on interlocking components. His firm is molding nestable pallets and, in the spring, will begin production of block pallets. The company is negotiating with customers for pallet-leasing contracts. Curton said potential customers include grocery stores and other food and beverage retailers.
Cabec's core businesses are oil and gas equipment suppliers and an oil field in Michigan. Curton said he is diversifying into plastic pallets because they represent a huge growth opportunity.
Plastic pallets have a small share of the market vs. wood, and he believes Plastic Pallet has the potential to be a dominant producer as the plastic versions catch on.
Curton estimates plastics have less than 2 percent of the pallet market, which he said is more than 1 billion units in the United States alone.
Shippers replace about 30 percent of wood pallets annually, according to Curton.
John said he learned about plastic molding several years ago when he designed a facial steamer based on plastic. He was unhappy with mold builders' quotes and delivery time so he decided to build his own molds and steamer prototype. He used that experience to develop a pallet based on relatively small components so he could avoid big molds and presses.
Plastic Pallet said in a news release that the private firm's owners have invested more than $3 million in their business.