Rising from the ashes of the mobile-telephone market, Finnish molder Eimo Oyj has again reached a deal to buy Triple S Plastics Inc. and form an international plastic-parts player.
The two sides had first announced in July 2000 that they would combine forces to take on the then-surging telecommunications market.
But long regulatory delays to complete the sale and downsizing by many mobile-phone makers spurred the companies to end the acquisition bid in March and cool their heels. Now, two months later, Eimo has made a new, lower-valued offer for Triple S that the Portage, Mich.-based molder has accepted.
``When we kept peeling the onion skin away, it seemed like we were the right two to come together,''' said Triple S Chief Executive Officer A. Christian Schauer in a May 25 telephone interview. ``Despite the volatility in the marketplace, both of us realized that we needed to be global suppliers to this industry.''
The stock-swap deal, with Triple S stockholders gaining about 21.4 million shares and options of Eimo stock, was valued by Schauer at about $40 million. Equity analyst Raoul Konnos of Carnegie Securities in Helsinki, Finland, said options could take that price closer to $60 million.
Eimo will exchange about 4.5 Eimo shares for every Triple S share. Previous offers from Lahti, Finland-based Eimo had been higher, ranging from 4.85-6.45 shares of Eimo stock for each Triple S share. But market conditions have changed - with many telecommunications makers announcing plant closings and layoffs - and Triple S also recently announced that its sales and profit will drop during this fiscal year.
Those factors helped Eimo reach a fair sales price under current conditions and a stronger deal for its shareholders, Eimo Executive Vice Chairman Elmar Paananen said May 25. Konnos, who follows publicly held Eimo, agreed and said Eimo backed out of the previous deal when the market slumped.
``They got scared on both sides,'' Konnos said. ``But it might have been more Eimo. I don't think it was a tactic to get a lower sales price as much as that they were really uncertain about the [mobile-phone] market.''
Business logic led Eimo to continue to pursue the sale, Paananen said. The two companies continued to talk and reached an agreement May 21. Ultimately, it boiled down to the fact that the companies could improve their reach into Asia and Latin America by combining and growing larger, he said.
``Every five or 10 years, every economy goes through ups and downs,'' Schauer said. ``We felt it was the right combination for sustainable growth and a commanding presence worldwide.''
About half of Triple S shareholders have pledged to approve the deal, he said. Unlike other offers, the latest bid does not include a clause for the sale to be quashed if economic conditions decline.
The sale, expected to be completed by October at the latest, will reap global rewards, Paananen said. Together, the companies will command about 10 percent of the plastics market for mobile phones and accessories and have combined sales of about $252 million and profit of $12.9 million in fiscal 2001, he said.
About 90 percent of Eimo's business is in telecommunications, as is 77 percent of Triple S' sales.
Eimo, which has a small molding plant in Shenzhen, China, would like to build three plants there eventually. And the company would like to expand in Brazil, where Triple S operates a joint venture plant in Manaus.
``Whether the market is good or bad, we know the combined company would definitely be stronger than either could be alone,'' Paananen said. ``Both of us are being asked by customers to provide service at the other party's locations.''
The Michigan molder will become a wholly owned subsidiary of Eimo, Paananen said. Schauer will continue as CEO for the company's operations in the Americas, and Triple S Chairman Daniel Canavan and director Evan Harter will sit on Eimo's board.
Triple S shareholders will own about a 30.9 percent stake of the total shares and options of Eimo. The combined companies will have about 1,600 employees and operate 11 molding plants and six tooling and prototyping facilities worldwide. Both gain technology in in-mold labeling, decorating and automated assembly, Schauer said.
Eimo, traded on the Helsinki Stock Exchange, saw its stock price rise by about 20 percent on May 25, Konnos said.
The stock price of Triple S, traded on Nasdaq, rose by about 4 percent to $7.50 share on the morning of May 25, when the deal was announced. Its stock has been as high as $33.80 a share in September.
Triple S was ranked 69th on Plastics News' 2001 listing of North American injection molders, with $95.1 million in relevant sales.