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July 20, 1998 02:00 AM

EUROPE'S E&&E GAINS U.S. GROUND

Frank Esposito
Senior Staff Reporter
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    Ellis & Everard, a leading European plastics and chemicals distributor, has made big moves to broaden its plastics business on both sides of the Atlantic.

    In the United States, E&E has acquired Performance Polymers Inc. of Leominster, Mass., a 9-year-old firm that claims to be the nation's fourth-largest resin distributor, with annual sales of $170 million.

    In Europe, E&E has acquired the distribution business of Victor International Plastics Ltd. Victor of Manchester, England, is owned by M.A. Hanna Co. of Cleveland.

    James Duffy, a Performance founder who will stay with the company as executive vice president, said the deal ``is the best way for the company to continue to grow.'' E&E is based in Chertsey, England.

    Performance sold more than 400 million pounds of resin last year from six regional offices and 13 major warehouses. The company employs 100 and distributes resin from 15 major suppliers including Dow Chemical Co., BASF Corp., Epsilon Products and Huntsman Corp.

    ``We looked at the big guys — General Polymers, Polymerland and M.A. Hanna — and decided [the sale] was the best way to compete with them,'' Duffy said.

    ``Ellis & Everard has money they can invest to help us grow, but this is about a lot more than money,'' Duffy added. ``They built a market-leading distributor in Europe and we believe they can build a significant company in the U.S.''

    M.A. Hanna resin distribution President David Knowles said the acquisition ``will be positive for the industry.''

    ``In terms of growth in the market, [E&E] will have a significant challenge ahead of them,'' he said. ``Ultimately ... the organization that is the most responsive and serves the customer's needs will gain share.''

    Officials at Polymerland, a Huntersville, N.C., distribution giant owned by General Electric Co., were aware of the E&E/Performance deal, but will not alter their strategy because of it, according to Polymerland spokeswoman Amy Crews.

    ``There are changes going on in our industry all the time,'' Crews said. ``A competitive marketplace is healthy for both customers and the businesses competing in that marketplace.''

    Although E&E distributes $800 million worth of chemicals in the United States annually, the purchase of Performance is its first venture into the U.S. plastics market. Overall, the firm's sales totaled $1.6 billion last year, all in chemicals and plastics distribution.

    E&E's David Jukes, who will take over as Performance's vice president of corporate development, said E&E wants to make Performance a full national distributor and develop a full distribution range for engineering resins.

    ``[Performance] has a nationwide presence, but they don't have equal strength in all areas,'' Jukes said. ``We'd like to improve that by building critical mass in areas such as the West Coast by opening new offices or acquiring other companies.''

    Jukes added E&E would like to even out Performance's product mix, which is 80 percent in commodity resins and only 20 percent in higher-priced engineering resins.

    Performance probably will move toward the 55-45 commodity/engineering mix of Distrupol, E&E's European resin distribution business.

    ``Now [Performance] has the financial strength not to worry about how they're going to compete,'' Jukes said.

    Performance's leadership will be consistent, with founder Michael Carota remaining as chief executive officer.

    Overseas, E&E's Distrupol division now gain's Victor's distribution business. Hanna, which bought Victor in 1996, will retain Victor's compounding and masterbatch business. A Hanna spokeswoman said Victor's distribution operation was ``a very small piece of the business'' for the company.

    ``We made a strategic decision to better invest our resources in the compounding business,'' the spokeswoman said.

    From Distrupol's viewpoint, the deal increases its market share in Britain to about 25 percent and adds several new suppliers including Fina Oil and Chemical Co. and Exxon Chemical Co., Jukes said.

    In a separate release, Ellis & Everard announced record overall sales up 13 percent to £732 million ($1.19 billion) for the year ended April 30, with 1998 pretax profit up 8 percent to more than $52 million.

    Despite low prices in European polymers distribution, the sector provided ``useful volume gains,'' reported E&E Chairman Jonathan Taylor.

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