LONDON — Custom injection molder SPM Inc. may soon have a new owner. SPM's current parent, Coats Viyella plc, announced this month that it may sell, rather than spin off, its Precision Engineering Division.
London-based Coats Viyella announced it is in talks with potential purchasers for the division, which includes Anaheim, Calif.-based SPM and metal die-caster Dynacast.
In September, London-based Coats Viyella had announced plans to demerge PED, creating a new, stand-alone company. This was part of a restructuring plan to focus on its textile, thread and engineering businesses. The spinoff was scheduled for early 1999.
But the parent firm now says it will consider a number of takeover offers for the engineering division before deciding whether to proceed with the demerger.
``The group has received several approaches for its Precision Engineering Division,'' the company said in a statement issued in London. ``Given the credibility of the counterparties and the level of interest expressed, the board has determined that it should explore these approaches to establish whether a sale of PED offers more value to Coats Viyella than would be realizable through the demerger.''
Last year the engineering division reported operating profit of £35.4 million (US$59 million) on sales of £319 million ($530 million).
Coats Viyella said it will give more information on the progress of the talks in January.
SPM, with 16 plants in the United States, Canada, Mexico, Brazil, Malaysia, Wales and Ireland serving the automotive, medical, consumer, telecommunications and computer markets, is run by Dynacast Inc. of Yorktown Heights, N.Y., a subsidiary of Dynacast International Ltd. of Alcester, England.
In London, analysts agree that several British engineering firms are interested in PED, including London-based electronic components molder Cookson plc and McKechnie plc of Walsall, England. Analysts also expect interest from venture capital groups, London-based Schroder Ventures and Legal & General Ventures.
The potential buyers cited would not confirm their interest in PED and declined comment on the bidding.
One London analyst said the engineering business is efficient and successful. Analysts predict it could fetch up to £300 million ($498 million) — well ahead of the parent group's current market value of around £172 million ($285 million).
SPM ranked 21st in Plastics News 1998 survey of North American injection molders, with sales of $235 million. Referring to Coats Viyella's announcement, Tom Bramblett, SPM's vice president for business development, said: ``[Coats Viyella] just see that group as a good, profitable group and maybe this is a time to sell.''
In a telephone interview from his Raleigh, N.C., office, Bramblett said PED is ``a very well-run operation in plastics and die casting.'' He said SPM is strong because of its size and its large customers.
Even so, it is also clear that SPM has been hit by regional economic crises and by changes in some key markets. When Coats Viyella reported its financial results in September for the first half of 1998, the firm admitted that plastics is ``remaining difficult.''
It blamed the weakness in plastics on ``high market volatility, particularly amongst the electronics and computer industry customer bases,'' exacerbated by the effects of the Asian economic crisis. PED's half-year operating profit was down £4.8 million ($7.9 million) to £15 million ($25 million).
In the United States, an industry analyst interviewed Dec. 9 believes SPM is ``really having problems keeping plants busy.'' He believes some of SPM's plants are running at 50 percent capacity, demonstrating that ``custom molding is a difficult business now.''
Plastics News' West Coast correspondent Roger Renstrom contributed to this story.