Plastics Mfg. Co., a high-precision injection molder, has filed for an initial public offering that could raise as much as $6 million for expansion. The company wants to use cash from public stock transactions to help it grow into a molding power.
The company's strategy is to reach sales of $250 million by fiscal year 2004, according to a Dec. 3 Securities and Exchange Commission filing. Until this fiscal year, Plastics Mfg., called PMC, was a development company with limited sales of less than $1 million.
The manufacturer primarily makes high-volume parts for electronics, medical and consumer products, including cellular telephones, pagers, nail guns and computers. Currently, about 18 percent of its sales come from communications products made for six divisions of Motorola Inc.
Within the industry segment served by PMC, main competitors include the much larger Nypro Inc., Phillips Plastics Corp., InteSys Technologies Inc. and Hoffer Plastics Corp., the filing stated.
But the company wants to play catch-up. Already in the works is a new molding plant in Fort Worth, Texas, due to begin operations during the second quarter of 2000, and a co-located molding facility with Illinois Tool Works Inc. in Green Oaks, Ill., due to start production in February.
The company is also negotiating to acquire two other injection molding or toolmaking companies, according to the filing. No agreements have been reached.
PMC reported a loss of $674,000 on sales of $7.46 million in fiscal 1999, which ended Sept. 30, according to the filing. It attributed the loss mainly to the need for capital to expand.
The majority owner of PMC is Mark Sellers, who also serves as chairman, president and chief executive officer.
Sellers also owns 10 affiliated companies under MGS Group of Germantown, Wis. MGS owns one of the largest injection toolmaking operations in North America: Moldmakers Inc. of Menomonee Falls, Wis.
The diverse MGS Group includes companies involved in product design, prototype molds, mold sampling, finishing and detailing, turnkey plant assembly, software packages and even lease financing.
The group records about $50 million in annual sales, according to recent Plastics News articles. Sellers would not comment, citing SEC blackout rules.
None of the other MGS companies is publicly traded. The idea is an unusual one for a small injection molder, said David Strickler, head of automotive mergers and acquisition research for First Union Securities Inc. of Charlotte, N.C.
"It's pretty rare," Strickler said. "Most smaller companies primarily use the bond market and investment banking to finance acquisitions, and that seems to work well. The stock market is usually reserved for larger, publicly held companies."
But MGS is no stranger to equity investors. Both MGS employees and outside investors own common stock in MGS companies. From August to September 1999, PMS and other MGS companies sold 722,490 shares of common stock.
For the IPO, MGS will offer 500,000 shares at an expected price of $12 per share, according to the filing.
The offering will take place 30-60 days after the Dec. 3 SEC filing, or by early February, said Wausau, Wis.-based lawyer Arnold Kiburz III, who assisted with the filing.
After the offering, Sellers and MGS Group collectively will hold at least 53 percent of the stock. About 12 percent of the company's stock will be offered to the public.
If growth plans go as anticipated, the company may offer more stock publicly, Kiburz said.
The company plans to use proceeds from the initial offering and bank financing to expand. About $10 million will be spent to buy molding equipment for PMC's existing Germantown plant and the new operation with Illinois Tool Works.
PMC entered a five-year agreement with ITW's Paslode Cordless Tool Group to make injection molded parts.
The company will use about 29,000 square feet of space at ITW's Green Oaks plant to mold fasteners and power tools for the residential construction industry, the filing stated.
Sales for the ITW work are expected to reach $2.7 million for fiscal 2000, the filing stated.
During the first quarter, the company also plans to install $4 million in tooling equipment and $10 million of molding equipment at Fort Worth, the filing said. That leased, 142,000-square-foot plant will perform injection molding, assembly and toolmaking.
In total, PMC expects to buy about 40 new molding machines, many with multishot capabilities, in 2000, according to the filing. Currently, PMC operates 54 presses at its Germantown facility, where it leases 66,000 square feet of space.
PMC stock will not be underwritten or traded publicly on any exchange, Kiburz said.