Hancor Inc.'s parent company is entering the PVC extrusion business, but company officials and industry observers aren't sure what the move will mean in the competitive construction products market.
Hancor Holdings LLC is paying $157.5 million for Jannock Ltd.'s vinyl group, which includes seven PVC profile extrusion plants.
Hancor Holdings was established for the purpose of this transaction, and is owned by an investor group including Citicorp Venture Capital Ltd. of New York. The investors already owned Hancor Inc., a Findlay, Ohio-based high density polyethylene pipe extrusion company.
The relationship between Hancor Inc. and Jannock's vinyl operations still is unclear. Early last week a Hancor spokeswoman denied that Hancor Inc. was related at all to Hancor Holdings. But by May 6 Hancor released a terse statement that said it was too early to comment on the deal.
Hancor Inc. spokeswoman Paula Deter said the HDPE pipe company will operate separately from the vinyl group.
However, if the companies are combined, it will create a construction products powerhouse. Hancor Inc. ranked 10th in Plastics News' 1998 survey of pipe, profile and tubing extruders, with $210 million in annual sales. Jannock ranked eighth in the same survey, with related sales of $257.6 million.
Jannock decided to exit the vinyl products industry to concentrate its resources on its metal products group.
But Jannock has not walked away from the plastics industry completely. It will keep one foot grounded in the pipe market by maintaining Big `O' Inc., an extruder of HDPE corrugated pipe in Exeter, Ontario, which it bought last year.
Jannock had merged Big `O' into its metal pipe business.
Hancor Holdings is buying the vinyl operations for $152.6 million in cash and $4.9 million in equity in the new firm, said Brian Jamieson, Jannock's vice president of finance and chief financial officer.
Some competitors do not expect the deal to affect the industry's major players.
``I don't see where it's going to have any impact at all,'' said Lloyd Ambler, president of CertainTeed Corp.'s pipe division in Valley Forge, Pa.
Richard Jakovac, vice president of marketing at CSR Hydro Conduit, agreed. Houston-based CSR competes with Hancor in the pipe industry.
One industry analyst said Toronto-based Jannock Ltd. made the right decision to sell the vinyl group. Brad Smith, an analyst with Merrill Lynch in Toronto, said Jannock will use the extra cash generated by the sale to expand its more profitable metals group.
The company has suffered since the fall of 1997, when Owens Corning of Toledo, Ohio, entered the vinyl siding market, stealing much of Jannock's business in that area, he said. Jannock's vinyl group also includes manufacturers of fencing, decking, widows and doors.
Though Jannock reported a significant increase in sales for its Jenisys Metal Group, 1998 was considered a mediocre year, Jamieson said. But the company's vinyl-product sales dropped 5.4 percent to US$242 million in 1998, and Jannock believes the metal group has more potential, he added.
``We struggled with [the vinyl group]. Our primary reason for leaving was to focus on our metal group,'' Jamieson said.
Though Jannock has a history of being able to turn troubled businesses around, Smith said keeping resources tied up in the vinyl market for several years might have had an adverse effect on the metal group.
The vinyl group is based in Pittsburgh, and its plants are in the eastern and midwestern United States. As part of the deal, its 1,500 employees will remain with the vinyl group, Jamieson said.
Jannock's metal group has 47 manufacturing plants scattered across the country.