Acquisition-hungry sheet maker Spartech Corp. closed its largest-ever acquisition between the holidays, spending $217.5 million for Uniroyal Technology Corp.'s sheet business. The deal, announced Dec. 27, gives Spartech nine more factories — three making Royalite thermoplastic sheet and six making Polycast cell-cast acrylic products. Royalite helped pioneer ABS sheet in the 1940s.
Spartech said Uniroyal's High Performance Plastics Inc. subsidiary had annual sales of $130 million for the fiscal year ended Sept. 26.
Those sales are about evenly split between Royalite and Polycast, said Randy Martin, Spartech's vice president of finance and chief financial officer.
"It expands our product-line capabilities and expands our offerings in new markets," he said in a Dec. 27 telephone interview from Spartech headquarters in Clayton, Mo.
New products include Royalite's flame-retardant ABS sheet used for mass-transit markets such as seat backs and drop-down tables on airplanes and buses.
"This was a major new product addition that we don't currently do today," Martin said.
Royalite also makes lightweight sheet used in canoes and static-dissipative sheet used for computer and electronics components.
The three Royalite factories are in Warsaw, Ind.; Redlands, Calif.; and Rome, Ga. Martin said Spartech will honor a union contract recently ratified by 170 workers at the Warsaw plant — the plant's first union pact.
Martin said acrylic sheet and shapes, acquired with the Polycast business, is entirely new to Spartech. Polycast factories make cell-cast acrylic sheet, made by pouring liquid resin into a mold and allowing it to cure. The process gives the sheet exceptional clarity, Martin said.
Polycast plants making acrylic sheet, rods and tubes are in Hackensack, N.J.; Stamford, Conn.; and Des Moines, Iowa. Martin said Uniroyal Technology already had decided to close a Polycast plant in Stirling, N.J., and move production to Des Moines, before the sale was announced. The Stirling facility is not part of the deal, he said.
Two other Polycast plants are in Florida, in Rockledge and Melbourne. Those plants fabricate acrylic parts for boats, such as hatch covers, cabinet trim and windshields. Another factory in Phoenix stretches sheet into windshields and other aircraft parts.
Uniroyal Technology of Sarasota, Fla., said it sold the sheet business to focus on optical products such as light-emitting diodes. Spartech had $524.7 million in fiscal 1998 sheet extrusion sales, according to Plastics News data.
Martin said Uniroyal's sheet business marks the 14th acquisition by Spartech since 1993, and the biggest in terms of sales and price paid. The deal expands Spartech's geographic reach and brings employees skilled in new technologies, he said.
Bradley Buechler, Spartech chairman, president and chief executive officer, said: "We expect to retain nearly all HPP personnel following completion of the transaction."
The High Performance Plastics sheet operation employs 850.
Spartech is North America's largest sheet extruder, according to Plastics News data. The Uniroyal Technology sheet business is the ninth-largest sheet manufacturer in the PN ranking.
After the Dec. 27 deal, investors gave both companies a belated Christmas present — higher stock prices. The day of the announcement, Spartech's stock climbed about 8 percent, to $30.63 a share, on the New York Stock Exchange. The stock moved to $31 the next day.
Uniroyal Technology's stock jumped 18 percent on the Nasdaq exchange, to $23.25 a share.
Spartech regularly buys two or three companies a year — but makes each deal count, said Gary Prestopino, a Chicago analyst who follows Spartech.
"The majority of the acquisitions they have made have gotten them into new products and new markets," he said, adding that the Uniroyal sheet business has a healthy 15.7 percent operating margin.
As Spartech gets bigger, it has more leverage to buy resin at cheaper prices, said Prestopino, senior vice president of Tucker Anthony in Chicago.
John Witt, chairman and CEO of a competing sheet extruder, Witt Plastics Inc. in Greenville, Ohio, called Uniroyal "an excellent fit for Spartech."
"Spartech continues to be a good model for intelligent, profitable growth in our industry by focusing on technology innovations along with profitability and bottom-line, real growth," Witt said.
Some other sheet producers buy simply to boost sales volume, a strategy that can lead to "giveaway selling" he added.
Spartech said the acquisition should close by Feb. 29.