HOUSTON — A new business focused on hastening consolidation among plastics processors could issue an initial public offering early next year on a deal combining six or seven U.S. film processors.
``The idea is to grow earnings per share by 30 percent a year,'' Tim O'Neal, Plassein Partners managing partner, said at Flexpo '98, held in Houston, June 24-26. ``We're not going to create the perfect company from day one, but we can build some serious public equity.''
O'Neal declined to identify the companies involved but said they are based throughout the United States with annual sales ranging from $8 million to $50 million.
O'Neal and partner Eric Paulsen formed Plassein in January after leaving Enron Corp. of Houston. They worked on Enron's resin forward-pricing program and, while researching the project, saw plastics processing's consolidation potential, which they said houses 10,000-15,000 businesses.
``It's a fragmented industry and there are probably too many players out there,'' O'Neal said. ``By consolidating, businesses can have more leverage to get lower resin costs and can spread their technology and equipment costs over a wider base.''
Plassein is working to arrange consolidations in individual processing segments, such as injection molding and rotational molding, but eventually hopes to unite businesses in various segments under one corporate umbrella.
To do so, Plassein will have to overcome what O'Neal calls ``industry myopia,'' which causes processors to be wary of linking with a firm that does something different from its niche.
``In talking with processors, we've found companies that are good in technology, marketing and finance — but very few do all three properly,'' O'Neal said.
The ``roll-up'' strategy Plassein is using in the proposed film processor deal allows a group of small companies instantly to gain the size advantages of a publicly traded company, said O'Neal.
``Capital is king in this industry and the small guys don't have enough of it,'' he said. ``Small companies are starting to realize [consolidation] has to happen if they want to be a viable enterprise five years down the road.''