JPE Inc.'s creditors have rejected a bid to buy the U.S. operations of the financially strapped automotive supplier.
Chinese manufacturer DGI Investments Inc. signed a letter of intent Oct. 7 to purchase a controlling interest in JPE's U.S. facilities for $10 million in cash. Stockholders would have received $1.25 per share.
The purchase would have helped Ann Arbor, Mich.-based JPE recover from its lingering fiscal miasma. In September, the supplier put two plastic parts subsidiaries — Plastic Trim Inc. of Dayton, Ohio, and Starboard Industries Inc. of East Tawas, Mich. — under Chapter 11 bankruptcy protection.
The deal also could have boosted shareholder spirits. JPE shares were trading over the counter at 31 cents per share on Nov. 5, after reaching a one-year high of $7.38 in November 1997. JPE was delisted from the Nasdaq exchange in July.
But those expectations faded. Sale conditions could not be met, and DGI backed out of the deal, said JPE Chief Operating Officer James Fahrner. That puts JPE back to square one attempting to find a buyer for the publicly traded company.
``The way the deal was structured, it was a very good transaction for our shareholders,'' said a disappointed Fahrner. ``Our job now is to create value for our shareholders. We're back looking for other [sales] opportunities.''
JPE may be close to finding a buyer for its Canadian operations, said several sources. The two injection molding plants in Kitchener and Peterborough, Ontario, are in receivership, and JPE must pay a $1.3 million unsecured loan guarantee to creditors.
Ventra Group Inc., a publicly traded maker of plastic and metal auto parts, is making a bid for those Ontario operations, according to a Ventra official who wished to remain anonymous. The possible sale price was not known.
Ventra, based in Cambridge, Ontario, had no comment on the possible purchase of those facilities, said Chief Financial Officer Dwight Rollins. Fahrner would not comment on Ventra's involvement.
A consultant who follows Ventra said the supplier has been ``dancing around'' the JPE plants for some time. Those plants would boost Ventra's capacity to make plastic bumper fascias and exterior trim parts, the consultant said.
``They could use the plants to help with new contracts they're getting,'' the source said. ``It wouldn't surprise me if they bought the plants, whether it's next month or six months from now.''
The plants, under the company's JPE Canada Inc. subsidiary, together were ranked 82nd on Plastics News' 1997 listing of North American injection molders. The plants recorded $57.8 million in 1997 sales.
Ventra, a global company with about $216 million in sales last year, could be looking for further acquisitions, said equity analyst John Novak with Toronto-based TD Securities Inc. Ventra has a track record of buying diverse suppliers that extend its product line and global reach, Novak said.
Still, Novak said he had heard nothing about a possible Ventra bid for JPE Canada.
``There has been speculation about those plants for over a year,'' Novak said. ``Nothing has moved quickly. I don't expect any sudden movement now.''
DGI had expected to move quickly to buy JPE's American plants, said David Mack, president of Falcon Group Inc., a consulting firm working with DGI on the JPE sale. But a five-company bank group representing JPE creditors nixed the deal after negotiating with DGI for more than a month, Mack said.
The banking group wanted between $105 million and $107 million to pay off JPE's debt, Mack said. DGI offered to pay the creditors over an 18-month period, but the group wanted its money sooner, he said.
``I think we were looking for something that wasn't possible,'' Mack said.
DGI, a Toronto-based affiliate of D'Long Development Group Inc. of Beijing, wants to buy other North American automotive suppliers, Mack said. DGI currently is looking at 18 potential acquisitions; six are companies making plastic parts, he said.
JPE recorded sales of $287 million in 1997 but lost $2.1 million. Much of that loss was attributed to JPE's Canadian operations.
JPE will continue operating all of its plants until buyers can be found, Fahrner said.
``We have adequate funding until we can restructure our operations,'' he said.