Automotive molder Venture Holdings Trust has won a bidding war to purchase a large European supplier, instantly making Venture a player on that continent.
The privately held, Fraser, Mich.-based holding company will spend $475 million in cash to buy Peguform GmbH of Botzingen, Germany, according to Peguform officials. The injection molder is owned by rigid film and packaging processor Klockner-Werke AG of Duisburg, Germany.
The transaction is scheduled to be finished in May after approval by Klockner-Werke shareholders, said Peguform communications director Wolfgang Christian.
Venture — through its auto-supply arm, Venture Group — emerged victorious after Peguform was put up for bid late last year. Several industry sources said other bidders included Textron Automotive Co. Inc., an interior-and exterior-parts supplier in Troy, Mich.
``We tried to look for a global corporate partner,'' Christian said in a March 9 telephone interview from Peguform's headquarters. ``At the end of the day, we thought the best solution was to sell Peguform to Venture. The companies have nearly the same range of products.
``The new group is much more global than either Venture or Peguform had been before.''
Together, the companies will have annual sales of close to $2 billion and operate more than 31 injection molding plants.
The new company will be a strong contender worldwide in plastic bumper fascias, made from thermoplastic olefins, and interior trim parts, said Robert Eller, president of consulting firm Robert Eller Associates Inc. in Akron, Ohio.
``Venture will suddenly become a significant interiors supplier in the highly competitive European market,'' said Eller, who just released a multiclient study on interior auto parts.
The combined firm will operate more than 500 injection presses, 300 of them from Venture. Peguform has about 200 presses at its 16 plants in Europe, Mexico and Brazil, Christian said. The combined company also will have more than 10,000 employees, 7,800 of them from Peguform.
Venture will swallow a company larger than itself. The Michigan supplier recorded sales of $624 million during 1997. Figures were unavailable for 1998, but the firm recorded $344.6 million in sales for the first six months of the 1998 calendar year.
Keeping to company policy, Venture officials declined to comment.
Peguform recorded sales of about 2 billion deutsche marks ($1.14 billion) during 1998, Christian said. Parent company Klockner-Werke racked up $2.85 billion in sales during that same period.
However, Peguform has had recent earnings difficulties, recording virtually no profit in 1998, Christian said. Those problems stemmed from difficult new product launches, he added.
The company had problems with warranty costs and quality issues, said equity analyst Richard Schramm of HSBC Trinkaus in Dusseldorf, Germany. Still, Peguform was sold for a reasonable price that should please Klockner-Werke, he said.
``It gives them a North American foothold,'' he said. ``This is a very good solution for the company.''
Venture also has a history of turning around underperforming companies, said analyst Eric Mollman of First Chicago Capital Markets. Two other companies acquired by Venture — molders Bailey Corp. of Seabrook, N.H., and AutoStyle Plastics Inc. of Grand Rapids, Mich. — had similar difficulties, he said.
Automakers are seeking suppliers large enough to meet their increasingly global need for parts, Mollman said.
``A lot of companies Venture's size have to make a choice between acquiring to gain share or making themselves available to be bought,'' he said. ``Long-term, this gives Venture a more diverse group of platforms and allows them to break in with more carmakers in Europe.''
Venture has 15 molding plants in North America, according to the company's 1998 annual report. The firm has other operations worldwide, including an Asia-Pacific regional headquarters in Melbourne, Australia.
Meanwhile, 14 of Peguform's 16 plants are in Europe, Christian said. The others, in Puebla, Mexico, and Curitiba, Brazil, recently opened to serve Volkswagen AG and other carmakers, he said.
Both companies make bumper fascias, the covering skin on a bumper, and interior molded parts for doors and instrument panels. Venture also compression molds exterior parts, while Peguform is known more for its door modules and dashboard parts, Christian said.
Peguform will become a separate business unit under Venture Holdings, according to a Venture news release.
The deal leaves auto supplier Textron — both a competitor and a customer to Venture — out in the cold in Europe, Eller said. ``This will undoubtedly put pressure on Textron to enhance its European position,'' he said. Textron officials were unavailable.
Venture was fourth on Plastics News' 1998 ranking of injection molders with an estimated $420 million in related North American sales.