With a new financial partner lined up, a reinvigorated Collins & Aikman Corp. is taking a look at some possible plastics acquisitions to help it improve its overall strength in automotive acoustics.
Heartland Industrial Partners LP has invested $260 million to buy a 60 percent stake in Troy, Mich.-based C&A. The company plans to pay down existing debt and free up money for future strategic purchases and business alliances.
For the auto supplier anxious to build a reputation as the acoustics leader, that could mean expanding its product reach so it can control every material in a vehicle interior, Chairman and Chief Executive Officer Thomas Evans said in a Jan. 16 conference call with analysts.
"The acoustics, sound engineering game is going to be a major boon for us," he said. "We want to continue muscling up ... and add more technology to the portfolio, maybe add some more capability to the platform in Europe and really bring that portfolio of enhanced acoustics as far up the product chain in the carpeting, fabric, plastics area as we can, which is kind of a directional hint of where else we need to add some things.
"It wouldn't hurt to have a little broader portfolio capability in plastics, be a little bigger scale player in plastics."
The company also will consider making some acquisitions in the automotive fabrics area, which Evans termed "ripe for some consolidation."
He would not specify what targets Collins & Aikman has.
"I've always got a few things lined up," Evans noted. "At the end of the day, we will move aggressively, and that's to say that we are very strategically aligned with Heartland, and we view growth in the areas I've outlined as critical.
"I think you'll see us move faster vs. slower."
Acoustics, which uses a variety of materials to affect the sound of a car, is increasing in importance to automakers, Evans said. With both federal and various state agencies anxious to cut down on driving distraction by allowing only "hands-free" cellular telephone use in cars, the importance of having a quiet ride will increase, he said.
In December, the firm bought Comet Acoustics, an acoustics software developer that was part of Automated Analysis Corp. of Ann Arbor, Mich., for an undisclosed sum. The system specializes in computer-aided engineering programs to reduce low-frequency noise in cars.
Heartland is a $1.1 billion financial investment group co-founded by David A. Stockman, who served as director of the office of management and budget under President Ronald Reagan from 1981-85.
Stockman also was a partner in Blackstone Capital Partners L.P., which — along with fellow financial group Wasserstein Perella Partners L.P. — owned 87 percent of the publicly traded Collins & Aikman stock until this month.
Blackstone and Wasserstein Perella sold 27 million of its shares to Heartland for $5 per share. The transaction reduced its stake in the business to 31 percent.
Heartland also bought another 25 million newly issued shares at $5 per share.
Collins & Aikman stock had been selling at $4.06-$4.80 per share through the first seven trading days of January. It closed at $5 a share on Jan. 11, the day before the deal was announced.
Stock prices climbed to $5.40 in the days following the deal. Throughout the past year, shares ranged from a little more than $7 in May to about $3 in late November.
Analysts had mostly positive comments on the arrangement. Standard & Poor's Corp. affirmed the firm's credit status as "stable."
"Management has successfully implemented a reorganization plan designed to improve the company's competitiveness," the New York-based firm announced. "Strong operating performance and improved working capital management has led to improved cash-flow generation and reduced debt standards."
Collins & Aikman listed $791 million in long-term debt at the end of September, down from $912.5 million at the end of 1999 and more than $1 billion in 1996.
Heartland's investments add up to a capital infusion of $125 million in Collins & Aikman, Evans said. The firm also is refinancing some of its outstanding debt. With the new funds and anticipated reduced interest rates, the business now can access funds as needed to make strategic purchases.
Collins & Aikman has global sales of about $2 billion, but only about 17 percent of that action is in Europe. The company is not aiming to make its overseas branch as large as in North America, Evans said, but it does want to expand beyond $400 million in overseas sales.