Reunion Industries Inc., the parent of injection molder Oneida Rostone Corp., is postponing a planned merger with Chatwins Group Inc. amid financing and legal snags.
The companies were to merge Aug. 5, but Reunion on July 16 announced that a refinancing deal for the combined company was not completed. At least two stockholders also sued Reunion alleging Chatwins principals would benefit at the expense of Reunion's shareholders if the deal went through.
Arranging financing will delay the closing of the merger until later in the year, the company reported July 31. Until then, Reunion may be strapped for cash.
Reunion reported: ``The company will not have sufficient resources to meet its corporate, legal and environmental expenses over the next 12 months ... unless additional financing is arranged.''
But those problems deal with the parent company and businesses it no longer owns, not Reunion's main plastics business, Richard Evans, chief financial officer of Reunion, said in an Aug. 6 telephone interview.
``Our plastics operations are separately financed, and there should not be any impact on them, just the holding company,'' Evans said.
Oneida's Molded Plastics division injection molds custom thermoplastic parts at three locations: Oneida and Phoenix, N.Y.; and Clayton, N.C. Rostone molds thermosets and produces polyester bulk and compression compounds in Lafayette, Ind. Oneida also owns Data Packaging Ltd., an injection molder in Mullingar, Ireland.
A merger also would be a reunion of sorts for Oneida, which Chatwins sold to Reunion in 1995. But even without a merger, Chatwins, a private fabricated metals company based in Pittsburgh, and Reunion, based in Stamford, Conn., are intertwined.
Chatwins already holds 38 percent — and has voting rights on about 46 percent — of Reunion's publicly traded stock. Reunion's president and chief executive officer, Charles E. Bradley Sr., is chairman and majority owner of Chatwins.
The deal, first announced June 8, called for Chatwins' common stockholders to receive 8.5 million or 9 million new shares of Reunion, depending on whether Chatwins completes an unrelated acquisition of a company Bradley controls through another corporate entity.
Reunion also would pay $8.3 million to Chatwins' preferred shareholders, who consist of Bradley and a partner, John G. Poole.
Reunion would be the surviving company in the deal, although its $93 million in 1997 sales are half of those for Chatwins.
In July, an individual investor and Ravenswood Investment Co. LP filed separate suits against Chatwins, Reunion, Bradley, Poole and others in Delaware's Court of Chancery.
The Ravenswood suit claims the merger ``will result in a financial windfall to Chatwins'' at the expense of Ravenswood and 1,400 public stockholders.
``By virtue of their dominance and control over the company, Chatwins and the individual defendants have engaged in a plan or scheme to increase Chatwins' ownership of Reunion for grossly inadequate consideration in the merger, thereby unfairly reducing the public's proportionate ownership,'' Ravenswood said in its complaint.
The suit seeks to block the merger from happening or rescind it if the deal is already done.
Reunion said in a quarterly statement released July 31 that the merger plan's valuation of the two companies is accurate. ``Reunion therefore believes that these lawsuits are without merit and intends to pursue their dismissal vigorously,'' the company said in its report.
While the company's plastics operations continue to be profitable, a battle surrounding the sale of Reunion's oil and gas holdings in 1996 caused the firm to report a $10.5 million loss in its second-quarter results.
Reunion vows to appeal the judgment, but it still must post an $8.8 million bond to continue fighting the case.