Summa Industries plans to expand its stake in electrical bobbin molding by acquiring Plastron Industries LP of Bensenville, Ill.
Summa said in a Feb. 22 news release that it will pay $20 million in cash for Plastron, now owned by Madison Capital Partners of Chicago.
Plastron had sales of $18.2 million last year. It molds and assembles transformers, relays and coils for electrical and electronic markets. Summa Chairman and Chief Executive Officer Jim Swartwout said Plastron fits well with Summa's Nyglas subsidiary, which also molds bobbins in Coronna, Calif.
Swartwout says Summa plans to keep the Plastron management team intact. He expects to finalize the purchase this month.
Plastron's business and employees have a good future under Summa, said Larry Gies, a partner in Madison Capital. Gies said Plastron is ``a terrific business'' and Madison Capital only sold it because Swartwout approached his firm with a profitable offer.
Madison Capital will continue to hold an indirect stake in Plastron by investing in Summa. Part of the purchase price includes Madison Capital receiving warrants to buy 200,000 Summa shares at $11.75 per share.
Summa will invest several million dollars over several years to increase automation of Plastron's downstream operations, Swartwout said.
Last fall Summa, of Torrance, Calif., boosted its injection mold building capacity by acquiring Canyon Mold Inc. of Valencia, Calif.
Summa expects the Plastron purchase will add 3 to 4 cents a share in earnings in the six month period ending Aug. 31. The deal will boost Summa's debt to capital ratio to about 57 percent but the firm expects to lower the ratio to 53 percent by the end of August if it doesn't make any other acquisitions.