A Swiss plastics specialist has purchased Blue Water Plastics Inc. for $131.5 million in a move the automotive injection molder calls inevitable in a consolidating industry base. The 40 percent cash buyout by Sarna Polymer Holding Inc. offers the best possible scenario for the business, its 1,200 employees and its hometown of Marysville, Mich., according to Carl C. Haas, Blue Water president and chief executive officer.
"It strategically was the best," Haas said in a June 13 telephone interview. "It keeps Blue Water together as a separate business unit. In essence, we'll be their [U.S.] operations. It was very important for our people that we stay together.
"Some other proposals that we'd seen, we didn't feel Blue Water would end up as the same company."
Sarna, based in Sarnen, Switzerland, will create a new division, Sarnamotive, spun off from its Sarnatech Division to integrate Blue Water. It is offering all management long-term contracts to stick around — including Carl Haas and his brother, John F. Haas, vice president and chief operating officer.
The Haas family members will continue for the near future with the company they owned for more than 20 years and that their father founded in 1951.
"Obviously, some things will change," Haas said. "[But] their philosophy has always been to maintain local management."
Blue Water listed $175.6 million in sales last year — $143.1 million from injection molding. It is on pace to hit about $180 million in sales this year. The buyout gives the company immediate access to global technologies and markets. The cost to expand and remain independent would have been just too high, Haas said.
"We have other family members in the company," Carl Haas said. "We just felt the risk involved out there is pretty substantial. The pressures today are pretty tough, particularly in the automotive arena."
Sarna reported sales last year of about 663.3 million Swiss francs (about $437 million), with its Sarnatech injection molding division responsible for the biggest single chunk, with nearly SFr316.2 million ($208.7 million) in sales. The second-largest division, Sarnafil, which makes thermoplastic membranes for roofs, waterproofing, and pool and deck liners, had sales of SFr310 million ($204.6 million).
It listed long-term debt of SFr82.3 million ($54.3 million) at the end of 1999.
Sarna already has two North American facilities, both in the Sarnafil family, in Canton, Mass., and Mississauga, Ontario.
The Blue Water purchase gives it immediate access to North American automakers, which it previously lacked. It already molds parts for European carmakers.
"The acquisition means the Sarnamotive Division has a presence in the two biggest auto markets in the world," said Hanspeter Kaser, Sarna Group chief executive officer. "The earnings power [Blue Water] is expected to contribute will lead to a sustained increase in the value of the Sarna Group as a whole."
Announcement of the purchase had an immediate impact on Sarna's publicly traded stock, its value jumping by 20 percent on the Swiss exchange.
"For Sarna, it's a very good acquisition," said analyst Matthias Egger of Pictet & Cie. of Geneva.
With sales for Sarnafil's products weakening, the company needed a stronger mix from Sarnatech, particularly in automotive, he said. Sarna's other two automotive molding units — Sarnatech Paulmann & Crone of Ludenscheid, Germany, and Sarnatech Schenk of Esslingen, Germany — make injection molded ash trays and cup holders for the European market.
Together, they accounted for SFr200 million ($132 million) in sales last year.
But with Blue Water, the new Sarnamotive Division will make a wider range of products and can offer them to carmakers throughout North America and Europe.
"They have products which Sarna does not produce and they can share the technology in different parts of the car," Egger said. "[Sarna] can enter the American car market with a very good customer base already established."
In addition to its eight U.S. molding plants, Blue Water also has a joint venture in Mexico.
"It gives us more access to some new processes and technologies and a manufacturing presence in Europe," Haas said. "We hope it will also give us some access to European [original equipment manufacturers] now in the states we haven't been able to reach before."
Sarnamotive is expected to make up half of all annual Sarna sales, according to a letter sent to shareholders signed by Kaser and Walter Meyer, chairman.
Earlier this year, analysts estimated purchase costs for a North American acquisition to climb as high as SFr300 million ($184 million).
"We believed the buying price would be higher," Egger said. "For that company, it was a very good price. This was really a good acquisition they made."
Haas admitted the family had concerns beyond a dollar value for Blue Water.
In addition to maintaining the long-term health of the company and its employees, it wanted a commitment to retain a connection to Marysville.
"That was a very high priority on our list," he said.
The town, which has a population of less than 9,000, is on the St. Clair River, about 60 miles north of Detroit.
Blue Water co-sponsored a training academy for plastics students at St. Clair Community College, has donated buildings for use in Habitat for Humanity and its executives and employees are involved in a variety of other nonprofit projects, he noted.
"From what I've seen of [Sarna's] community involvement in Europe and Switzerland, in particular, I believe they will continue those activities," Haas said.
Blue Water officials also have taken leadership roles in the plastics industry. John Haas is a former president of the Detroit Section of the Society of Plastics Engineers. Carl Haas has served on the Washington-based Society of the Plastics Industries Inc. board.
"They have been a big force for the industry," said SPE Detroit Section President Tom Powers. "I look at a lot of the other custom molders out there and Blue Water is far more involved in training and in promoting the industry."
Their negotiations with Sarna show how smoothly a transition can happen, when it is handled well, he noted.
"I think we strengthened our company," Haas said. "I hope we're not too naive, but we haven't gotten that impression yet."