Less than a month after Collins & Aikman Corp. received a cash infusion from a new majority owner to help it grow, it is ready to buy injection molder Becker Group LLC.
The proposed buyout for $60 million cash, $2.5 million worth of stock options and an $18 million noncompetition agreement follows up on C&A Chief Executive Officer Tom Evans' promised bet on plastics processing.
C&A has about $2 billion in sales annually. Becker Group posted sales of about $235 million last year. The plan, announced March 21, should wrap up within 60 days.
C&A's revived business model calls for it to become a specialized molder — what it terms a "mega Tier 2" — that will complement existing interior giants such as Lear Corp. and Johnson Controls Inc., rather than go head-to-head against them for contracts.
The company is plotting its long-term growth by building a unique niche based on engineering, acoustics and surface materials, and providing those programs worldwide, said Jonathan Peisner, senior vice president for corporate communications, investor relations and business planning for Troy, Mich.-based C&A.
"We've already had the [original equipment manufacturer] consolidation globally and seen the creation of mega integrators who will follow their OEMs around the world," he said. "You have a steep fall-off in terms of the companies out there that can support the mega integrators around the world."
Collins & Aikman, he said, is in a unique position because it can specialize in highly engineered components that improve the overall sound and look of a vehicle.
"It's not just to be a bigger guy who can shoot and ship plastic," Peisner said.
This marks the second time in three years that Charles Becker has sold an injection molding company. He was a principal owner of Becker Group Inc., which sold its $1.3 billion molding operation to Johnson Controls in May 1998 for $548 million plus $372 million in debt.
In 1999, Becker and his business partners bought back eight molding operations and two tool shops that JCI decided it did not need, and opened as Becker Group LLC, based in Sterling Heights, Mich.
Charles Becker is not likely to start another business this time, thanks to the $18 million noncompetition agreement — paid out over five years — and his new position as a vice chairman of the C&A board.
Becker was unavailable for comment.
Late last month, C&A finalized an investment from Heartland Industrial Partners LP that paid $260 million for a 60 percent stake in the company, buying out shares from previous majority owners Blackstone Capital Partners LP and Wasserstein Perella Partners LP.
The investment group, headed by David Stockman — who served as director of the Office of Management and Budget under President Ronald Reagan — provided a capital infusion of $125 million to help C&A pay down debt and free up funds for future acquisitions.
C&A still does the bulk of its business as a Tier 1 supplier, with about 80 percent of its sales going directly to automakers, Peisner said.
But the automotive business structure is changing, noted Greg Salchow, a Detroit-based analyst who covers C&A for Raymond James & Associates Inc. The biggest auto suppliers now are being asked to take over complete pieces of the car, such as the entire interior.
"The definitions of Tier 1 and Tier 2 are not as meaningful as they were a few years ago," Salchow said. "The way I think of it, more and more the Tier 1 is the designer and the integrator. The Tier 2 is the specialist."
While it is too early to know all of the details of how Becker Group will fit into C&A, Salchow said it seems like a good move.
"On the face of it, it looks like it's going to be a pretty decent fit for them," he said. "It does give them some different products they did not have prior to this deal."
C&A, Peisner said, can use its engineering know-how to bring in not only a plastic component to cover a pillar, but one that will meet federal standards to protect the head during a crash and also absorb unwanted sound.
"This strategy of being a mega Tier 2 and a bumper-to-bumper acoustics specialist — we're not looking to battle [major integrators] head-to-head," he said. "We're going to work with them."
C&A still has to make some other purchases to establish itself as a worldwide specialist. Becker Group has holdings in North America but lacks overseas operations. C&A likewise does the bulk of its business in North America, with about 17 percent of its sales in Europe and about 1 percent in Asia.
The company will be looking for chances to expand abroad, either through acquisitions, joint ventures or alliances, Peisner said.
But it has a head start with both the size and specialized emphasis other companies lack, he said.
"Right now, we're the only guy claiming the battleground," Peisner said.