Just a few weeks after Moldflow Inc. revealed plans to go public, the Lexington, Mass., maker of simulation software announced it is buying C-Mold, a major competitor, for $11 million in cash. The two companies are the dominant U.S. suppliers of software for computer-aided design and computer-aided engineering of injection molded parts. The purchase, announced Feb. 11, is expected to be completed May 31.
The deal will give Moldflow annual sales of about $28 million, with about $8 million of that figure coming from C-Mold. The firms' software creates three-dimensional models that predict how plastic will flow into a given mold. That helps designers develop new products quickly, before actually cutting molds.
C-Mold, formally known as Advanced CAE Technology Inc., was founded in 1986 as a spinoff from Cornell University's injection molding program. C-Mold is based in Ithaca, N.Y., and has a facility in Louisville, Ky.
Moldflow was founded in 1978. The company plans to raise $46 million in an initial public offering.
In a telephone interview Feb. 14, Marc Dulude, Moldflow's president and chief executive officer, said company executives and sales staff plan to get detailed customer feedback before deciding how to integrate the two companies.
"We don't know what we're going to do with the locations, or the people or the products," he said.
C-Mold officials were not available for comment. In a news release, K.K. Wang, C-Mold's co-founder and board chairman, said: "The customers in the plastics manufacturing industry will benefit greatly from our soon-to-be-consolidated technologies and resources."
The competitive battle between the two firms has spilled over to the courtroom in recent years. Moldflow sued C-Mold and a former Moldflow employee, Leonid Antanovskii, charging he took Moldflow trade secrets to C-Mold. C-Mold countersued, charging that Moldflow engaged in anti-competitive practices.
Dulude said the lawsuits have been put on hold until the deal goes through. If the sale happens, they will be dismissed, he said.
Moldflow has issued an updated prospectus that includes the C-Mold acquisition.
One analyst said the deal represents more than just Moldflow buying up a competitor.
"From Moldflow's standpoint, what they obtained is some very high technology to add to their stable," said Bruce Jenkins, vice president of Daratech Inc. in Cambridge, Mass.
Jenkins said C-Mold has developed advanced algorithms — the mathematical calculations known in the trade as "solvers."
"The quality of C-Mold's solver technology has gotten high marks from customers," Jenkins said.
Daratech researches the CAD, CAE and computer-aided manufacturing markets — which the firm thinks will hit $6.4 billion worldwide this year. But Jenkins said plastics-specific numbers are hard to come by.
Daratech places Moldflow in the top 10 suppliers of CAE software, a list that contains general suppliers, not companies that focus on plastics as does Moldflow. According to Daratech, Moldflow's 25 percent software sales growth in 1999 more than doubled the 11 percent pace of the overall CAE segment.