A compounding joint venture between M.A. Hanna Co. and Techmer PM has turned ugly, with Techmer demanding that Hanna dissolve the partnership and pay at least $5 million in damages. "Basically, we're saying we were fraudulently induced into the joint venture and we want out," Techmer assistant treasurer Maurice Benson said in a Feb. 24 telephone interview.
A Hanna official disputed the claims, and criticized Techmer's decision to make the rift public.
"We have made a number of different attempts to equitably resolve issues that [Techmer Chief Executive Officer] John Manuck has raised from time to time, but have not met with cooperation on Techmer's part," said John Pyke, Hanna's vice president, general counsel and secretary.
"Taking this issue to the marketplace through the news media can only lead us to conclude that [Manuck and Techmer] believe their case for arbitration is weak," Pyke said.
Cleveland-based Hanna, one of the largest plastics compounders and distributors in the United States, and the much-smaller Techmer formed Techmer PM LLC in November 1997 to produce color compounds and concentrates for film and fiber markets. At that time, officials said the new firm would work closely with Hanna's Southwest Chemicals unit, which makes color compounds at three sites.
In a Feb. 22 news release — and in a filing with the American Arbitration Association — Clinton, Tenn.-based Techmer makes a number of claims against Hanna, which owns 51 percent of the venture. Techmer's allegations include:
Southwest Chemicals has refused to do business with Techmer. Benson claims Techmer has done $15 million of business with Southwest, mostly in purchasing black and white compounds, since the deal was announced, while Southwest has bought nothing from Techmer.
Southwest has raided Techmer customers rather than sharing a mutual customer base.
The Hanna Color unit improperly obtained proprietary information from Techmer's additive suppliers to develop competing materials.
Hanna representatives on Techmer's board of directors have prevented Techmer from making acquisitions or growing the company, in an effort to lower the firm's value, thus lowering the amount Hanna would have to pay if Techmer triggered a buyout clause in 2003.
Hanna's Buford, Ga., fibers plant, which it contributed to the venture, had obsolete inventory and bad debt. That inventory included 280 drums of "dust collector" material, which had been contaminated by heavy metals and "was more or less toxic waste," Manuck said.
The Buford plant closed in May 1998. Techmer opened a new fibers plant in nearby Gainesville, Ga., that same month.
The dispute will be settled by the American Arbitration Association, a private firm that corporations use to settle business disputes without going to court. The association's rulings have been recognized as legally binding by federal courts, Benson said. A preliminary conference has been set for March 24.
"I had hoped it would not come to this," Manuck said in the Feb. 22 release. "However, M.A. Hanna has frustrated, obstructed or ignored all attempts for a fair and equitable resolution."
Hanna responded Feb. 23 with a statement in which Pyke said Hanna "has honored the terms and conditions of our agreement with Techmer PM and disputes the claims outlined in the demand for arbitration."
The turmoil has not stopped the venture's growth, as its sales have jumped from about $100 million in 1997 to about $130 million in 1999. But Benson said the growth could have been even higher if Techmer had not been battling Hanna and Southwest.
"We've been playing all these games with Hanna and we've still been able to grow," Benson said. "But it's like having leg irons on and still being able to run."
Manuck defended his decision to take the matter public in a Feb. 24 telephone interview, saying that Hanna, as a publicly traded company with $2.3 billion in annual sales, "needs to be accountable and responsible."
Manuck added that he still would be willing to buy out Hanna's 51 percent stake in the venture, but he wouldn't say how much that stake is worth.
Techmer was founded in 1981 as a partnership between Manuck, Rehrig Pacific of Los Angeles, Tokyo Printing Ink of Tokyo and Sangho Mercantile of Pusan, South Korea. The firm operates plants in Clinton and Rancho Dominguez, Calif., and plans to open a plant in Wichita, Kan., later this year.
"We've been able to work out partnerships with companies that don't speak our language, but not with M.A. Hanna," Benson said.