Automotive supplier Excel Industries Inc. is poised to make an acquisition that could turn the company overnight from a virtual nonentity to a key player on the European continent.
Elkhart, Ind.-based Excel signed a nonbinding letter of agreement Jan. 27 to purchase a 70 percent share of German injection molder Schade GmbH & Co. KG. The acquisition — potentially the largest ever for the Indiana company — includes Schade's seven European plants, which together recorded about $275 million in 1997 sales.
The deal would position Excel as a leading supplier of encapsulated window systems on that continent. Encapsulation involves molding a rectangular, single-piece plastic part around glass sheet to frame a window.
If financial conditions can be met, the sale will be final in early March, with a July 1 closing date, said Excel spokesman William Schall. The purchase will be funded from operating cash and standby credit lines, he said.
Although publicly traded Excel did not disclose sales terms, an industry analyst estimated the price at $75 million to $80 million, with about $30 million of that from cash and the rest in debt assumption.
``Right now, [Excel] is considered a large supplier in North America but not elsewhere,'' said equity analyst Eric Goldstein of New York-based Bear, Stearns & Co. ``This looks like a very good deal to put the company on a world stage. Ford [Motor Co.] is their largest customer, and they are the most aggressive among the Big Three in going to a global platform.''
Excel and Schade, based in Plettenberg, Germany, are no strangers, having shared products and technology since 1988, said Louis Csokasy, president of Excel's automotive business.
The alliance has proved fruitful. Excel has provided Schade with reaction injection molding technology to make polyurethane encapsulation systems, Csokasy said. Schade, in turn, has brought technology for rolled-metal upper door frames to Excel.
Both firms make encapsulated windows, which also can be injection molded using PVC and metal door frames. Separately they are developing inner door modules, one-piece molded plastic cartridges that slip inside steel door panels. A module can include a window regulator, wire harnesses, speakers and assorted window support pieces. The firms have worked together on customer presentations for the door modules, Csokasy said
He said the purchase was the next logical step between two firms that share similar interests and activities.
``It's kind of like growing up,'' Csokasy said. ``Sooner or later, we had to step up and take an equity position with them so we could act as one company. The idea is for us to be integrated on a worldwide basis to serve all parts of the world.''
Schade employs about 2,600 and operates three plants in Germany, two in the Cologne area, and has plants in the United Kingdom, the Czech Republic, Portugal and Spain.
Its largest customers include Volkswagen AG, Audi AG, BMW AG, Ford and General Motors' Adam Opel AG, said Wolfgang Krappe, Schade technical operations manager. The firm operates an undisclosed number of presses from 400-1,600 tons.
Hella KG Hueck & Co., a lighting and electronics supplier in Lippstadt, Germany, owns 30 percent of Schade. Excel is attempting to purchase the remaining 70 percent share now owned by private stockholders.
Schade realized that to stay competitive, it needed a U.S. partner, Krappe said.
Excel has no European plants. The firm supplies about 47 percent of its parts to Ford. About 65 percent of Excel's sales come from the Big Three, according to a 1996 annual report.
Excel and Donnelly Corp. of Holland, Mich., are considered the largest North American makers of window systems, said Mark Santucci, principal of Elm International Inc., an auto research firm in East Lansing, Mich.
In 1997 Excel expects auto sales of $600 million to $700 million, about three-fourths of its total sales. Sales to Ford have mushroomed from $26.7 million in 1985 to $413.2 million in 1996, according to the annual report.
The firm employs 6,800 at 27 plants. Its PVC window systems mainly are injection molded in Fulton, Ky., and PU RIM windows are made at a plant in Lawrenceburg, Tenn., Schall said.
Excel also expanded in South America two weeks ago, when it and partner Dura Automotive Systems Inc. of Minneapolis bought a majority stake in auto supplier Pollone SA, near Sao Paulo, Brazil.