Auto parts producer Pavaco Plastics Inc. plans to acquire bankrupt plastics recycler Custom Cryogenic Grinding Corp. of Simcoe, Ontario.
Pavaco corporate director Jerry Jean said his firm has placed an offer on Custom Cryogenic and expects to complete the deal the week of March 23, pending due diligence and acceptance of the offer by Custom Cryogenic's lenders.
Custom Cryogenic continues to recycle vinyl and other plastics and rubber following its Aug. 5 bankruptcy under the Business Insolvency Act, Jean said in a telephone interview from Pavaco's Guelph, Ontario, office. He said Pavaco plans to keep the operation in Simcoe and wants to buy Custom Cryogenic as a source of raw materials that can save costs.
Dan Heffernan, Custom Cryogenic's former chief executive officer, said the firm lost a major, undisclosed customer for recycled plastic last year and could not replace the lost business fast enough to avoid finanical problems. Complicating the issue was a recent expansion that led to excess capacity, Heffernan said in an interview.
He estimated the company's annual sales at about C$8 million (US$5.6 million) before financial difficulties struck.
The Simcoe operation has flexibility to tackle a range of scrap materials, including low-end scrap contaminated by paint, fabric and metals, Heffernan said. It uses liquid nitrogen to chill scrap before it goes to a stainless steel pulverizing mill. The process's low temperature eliminates heat history in recycling and allows very small particle sizes, which help processors use higher levels of recycled plastic. Custom Cryogenic also makes compounds based on recycled plastics and rubber.
Heffernan and two partners started Custom Cryogenic in 1979 in Milton, Ontario, and moved it several years ago to Simcoe, where it has access to low-cost liquid nitrogen and ``a good labor pool.'' The firm was traded on the Alberta Stock Exchange.
Jean said Pavaco's Hematite division makes auto splash shields, air management products and sound barriers out of vinyl and high-molecular-weight high density polyethylene. Pavaco also has nonautomotive divisions.