Two leading players in the plastic and fiberglass truck accessories market plan to merge by the end of the year and create a behemoth in what has been a highly fragmented industry.
The merger agreement, signed Nov. 26, would allow Anoka, Minn.-based Lund International Holdings Inc. to acquire a much larger competitor, Deflecta-Shield Corp. of Indianola, Iowa. The tender offer still must be approved by Deflecta-Shield shareholders and is scheduled to be completed by Dec. 26.
Lund has offered to pay $16 per share for the publicly traded company, which had been selling at about $15.75 recently.
The transaction is valued at about $90 million, including about $10 million in assumed debt.
The agreement already has the approval of the boards of directors of both companies.
In addition, Deflecta-Shield Chief Executive Officer Russell Stubbings and Director Charles Meyer — who together hold about 40 percent of the company's stock — have agreed to the sale.
Deflecta-Shield executives had rebuffed an earlier offer of $13 per share in September before agreeing to the new proposal.
The acquisition essentially would form a new company with more breadth of products and sales clout than its competitors, said Lund CEO William McMahon. Together, the merged companies are expected to generate about $130 million in 1998 sales, McMahon said.
``There was always agreement among the owners that this would be an ideal partnership,'' McMahon said. ``We have lots of synergies in both manufacturing and product capabilities where one company has always been stronger than the other. The industry is very fragmented and young, and we expect to be the market leaders and the low-cost providers by sharing our resources.''
McMahon said that most companies in the light-truck accessories market have sales of less than $40 million, while no company exceeds the $100 million mark. Deflecta-Shield recorded $72.3 million in 1996 sales, twice that of Lund's $36 million.
The entry of New York-based investment banker Harvest Partners Inc. sparked Lund's attempt to take command of the $1.6 billion light-truck accessories market. In September, Harvest acquired a 38.4 percent piece of Lund by buying out company founder Allan Lund.
As part of the Deflecta-Shield takeover attempt, Harvest has committed debt financing of $87 million and stepped up its economic stake in Lund to 60 percent and its voting share to 49 percent. Harvest general partner Ira Kleinman recently was appointed Lund board chairman.
The firm expects to take Lund to new levels of growth in truck accessories, according to Harvey Wertheim, Harvest managing general partner.
``When we made our first investment in Lund, we knew we were entering an industry with a good growth cycle but with a lot of little players,'' Wertheim said. ``What we [plan] to do is change the position of the market by growing quickly and keeping our eyes open for new acquisitions to bring into the fold. We're looking for companies that overlap and fit into what we acquired.''
Deflecta-Shield complements Lund's product line, said Harvest Vice President David Capobiancho. The Iowa company is a stronger producer of plastic truck accessories than Lund, which is heavier into fiberglass parts, he said. Deflecta-Shield also sells more products to original equipment manufacturers, while Lund's stronger suit is the truck aftermarket, he added.
Both companies make similar products for heavy and light trucks, which include minivans and sport utility vehicles. Accessories sold to the two markets include exterior sun visors, hood deflectors, rock guards, running boards, pickup truck bed covers and hood shields.
The companies make their plastics parts through injection molding, thermoforming and drape molding, which involves placing preheated resin over an open mold. The parts are made from engineered resins such as ABS, polycarbonate and acrylic.
Deflecta-Shield also makes aluminum accessories and suspension products, which Lund currently does not produce, Capobiancho said. ``It's a bold stroke to create an industry consolidator,'' he said. ``We plan to grow into retail markets and bring on new products as we move ahead.''
Deflecta-Shield, which has 570 employees, manufactures its parts in Corydon, Iowa; Longmont, Colo.; Compton, Calif.; Chicago; Howe, Ind.; and Coldwater and Sturgis, Mich. Press totals were unavailable, and company officials did not return several telephone calls seeking comment.
Lund has 130 employees at plants in Anoka and Oklahoma City.