In a move that will shake up the engineering resins compounding field, GE Plastics of Pittsfield, Mass., has acquired Exton, Pa.-based LNP Engineering Plastics Inc. from Kawasaki Steel Corp. of Tokyo.
``This is a really strong growth opportunity for us,'' GE Plastics spokesman Jay Pomeroy said. ``LNP has a lot of strong attributes and will allow us to expand our business.''
Robert Schulz, LNP president and chief executive officer, said the acquisition ``promises great things for LNP and for our people.''
Kawasaki will receive about 40 billion yen ($310.5 million) for LNP, according to Nihon Keizai Shimbun, a daily newspaper in Yomiuri, Japan.
The deal will allow GE to add nine compounding plants - four in North America, three in Europe and one each in Asia and South America - with 1,000 employees and annual sales of about $285 million. LNP also operates a recycling plant in the Houston area.
GE will increase its share of the North American compounding market to almost 9 percent, according to a Plastics News industry estimate, trailing only market leader PolyOne Corp. of Cleveland, which holds a 13 percent share.
Combined North American compounding sales for GE and LNP are estimated at $825 million. Slightly more than half of LNP's sales come from North America.
Schulz said the LNP sale was predicated by Kawasaki Steel's recent merger with NKK Corp., another Japanese steel maker. Kawasaki already had closed its Asian plastics business in 1998 and the NKK deal gave it even less reason to stay in the plastics market. Kawasaki had bought LNP from Imperial Chemical Industries plc of London in 1991.
``The [Kawasaki-NKK] merger was the driving force behind this,'' said Schulz. ``We had a good 10 years of ownership with Kawasaki, but they're doubling in size and need to get back to their core business, which is steel.''
LNP's product line includes reinforced nylon and polycarbonate, as well as a variety of lubricated, anti-static, long-fiber-reinforced and custom-colored compounds.
Like many compounders, LNP struggled in 2001. Although the company opened a new plant in San Luis Potos¡, Mexico, it eliminated 13 jobs at its Exton headquarters. Company officials said the cuts were the first in at least 20 years. Reduced orders also led LNP to reduce work weeks at some of its plants from seven days to five.
Schulz confirmed LNP's sales are down this year, but declined to give details. He added that he does not believe LNP's recent financial performance affected Kawasaki's decision to sell.
Schulz met with Jeff Immelt, chairman and CEO of General Electric Co., in early December to discuss the deal. Immelt spent several years of his GE career in plastics before moving through the ranks and replacing business legend Jack Welch atop GE earlier this year.
``This deal was on Immelt's radar screen,'' Schulz said of the 90-minute meeting. ``He wanted [LNP] to feel welcome and to get my input on the business.''
LNP will add its assets to GE's two compounding sites in North America and one in Europe. The combined business will continue to be based in Exton. Senior LNP management also is expected to remain in place.
GE had been one of LNP's suppliers of PC and several specialty resins. LNP also licensed a line of polyester compounds from GE several years ago.
The combination will benefit both sides, according to Schulz.
``We'll have some access to technology we didn't have before,'' he said. ``And GE will get our brand identity and market reputation.''
The deal is the latest chapter in LNP's meandering corporate history. The firm was founded as a liquid nitrogen process grinder in a New Jersey garage in 1948. It was sold three times between 1976 and 1991, at one point being owned by Beatrice Foods.
The move also will be the fourth ownership change Schulz has experienced since joining the firm in 1966.
``Every time we've changed hands, we've survived and prospered and come out stronger than before,'' he said. ``Now we're going to give it another try.''