Under the gun from investors and carmakers alike, long-time automotive parts supplier Excel Industries Inc. plans to sell its entire operation to Dura Automotive Systems Inc.
Excel, based in Elkhart, Ind., makes a broad range of auto parts at its 30 plants. The company is a global leader — considered in the top two worldwide — in the production of plastic window assemblies. The encapsulated window enclosures are either extruded from PVC or made from polyurethane in a reinforced reaction injection molding process.
The company also is a large producer of injection molded parts, including trim and taillight assemblies and door handles. Those operations are primarily based at Excel's Nyloncraft and Mark 1 Molded Plastics subsidiaries, based in Mishawaka, Ind.
The sale raises the question of whether Dura will keep Excel's plastics plants. Dura, based in Minneapolis, has limited expertise in plastics manufacturing, devoting much of its operations to cable-related systems and driver-control mechanisms.
The company will assess each of Excel's product lines before deciding how to proceed, said Dura President and Chief Executive Officer Karl Storrie during a Jan. 19 conference call.
``To get the critical mass we needed, we've had to look outside our core businesses,'' said Storrie, based at Dura's Rochester Hills, Mich., automotive office. ``Some of our products, particularly window regulators, fit in very well with Excel. But we need to look at all of it.''
The company expects to lower costs at Excel plants by as much as $6 million in 1999 and $20 million next year, Storrie said.
Dura will buy Excel under a cash/stock purchase option. Based on the current share price, Dura will pay Excel stockholders about $332.8 million. In addition, Dura will assume about $153.7 million in Excel's debt, for a total price of about $486.5 million.
Excel stock, as of Jan. 20, was trading at $25 per share on the New York Stock Exchange. Excel's stock price jumped more than $4 per share on Jan. 19, the day the proposed deal was announced. Both Dura and Excel stocks were trading heavily.
On Excel's side of the ledger, the sale also is about critical mass, said investor relations spokesman William Schall. As more engineering and program-management costs are shunted from carmakers to suppliers, it became more difficult for Excel to compete at its sales volume, Schall said.
Excel is no sales bantamweight. The company expects to record about $1.1 billion in sales during 1998, Schall said. But even that volume is not large enough, he said.
``For smaller entities, it becomes real burdensome to find cost savings,'' he said. ``Even for us, a billion-dollar company, we were in a pretty stiff position.''
Dura is paying a fair price for Excel, said equity analyst Michael Corelli of Du Pasquier & Co. in White Plains, N.Y. He said many analysts anticipated a sale based on Excel's underperformance.
``The company needs to be bigger to be competitive,'' Corelli said. ``That way, Excel can be a lower-cost producer on price. It makes it easier.''
With a flagging stock price — Excel stock was trading around $17 a share in late November — a stockholder group had threatened a proxy fight at Excel's annual meeting in April to force the company to sell its assets.
Both companies are taking a risk with the deal, expected to close by May after the suppliers go through a due-diligence process. For Excel, it means the end of a 70-year-old company first formed to make window curtains for early car models.
Management took Excel public in 1984, Schall said. It is too early to determine what role Excel Chief Executive Officer James Futterknecht Jr. and other officers will play in the new firm, Schall said.
The Minneapolis supplier recorded sales of $449.11 million in fiscal year 1997. Together with new Dura contracts and recent acquisitions, the merged company plans to exceed $2 billion in sales in 1999, Storrie said.
The sale will include Excel's operations in Europe with Schade GmbH & Co. KG of Plettenberg, Germany. Schade, which has seven plants, makes molded window and door assemblies. Excel paid about $9.6 million to buy 70 percent of Schade in February 1998.
