Precise Technology Inc. acquired injection molder Courtesy Corp. at a bankruptcy auction Aug. 22 for $130 million, a move that doubles Precise's size and significantly expands the firm's presence in the health-care market.
The sale is pending approval by the U.S. Bankruptcy Court in St. Louis, where Courtesy's parent company, LLS Corp., filed for protection from creditors earlier this year. Precise and LLS said they expect court approval by Sept. 30.
As part of the deal, LLS has settled a lawsuit with former Courtesy owners Walter Kreiseder and Gerald Sommers.
Precise, an injection molder and mold maker based in North Versailles, Pa., paid much less than the $353 million that Dallas-based investment house Hicks Muse Tate & Furst Inc. paid when it bought Courtesy from Kreiseder and Sommers in 1999. When LLS filed for bankruptcy, it said it was burdened with debt.
The combined companies will have sales of nearly $300 million and about 450 injection presses worldwide.
``We're going to stay focused in health-care and thin-wall packaging and proprietary packaging,'' said John Weeks, president and chief executive officer of Precise. ``We bought the company for what we're going to become together.''
Weeks said it is too soon to say what changes, if any, Precise will make in management or in operations.
Precise and Courtesy both specialize in medical, custom packaging and proprietary products, but Weeks said they do not have much overlap in their customer bases.
Courtesy, which has most of its production in Buffalo Grove, Ill., has a larger medical business, and has some clean-room molding and assembly capabilities that are particularly attractive to Precise, said Mike Farrell, Precise's executive vice president.
Precise is owned by Code Hennessy & Simmons LLC, a Chicago-based equity investment firm. Code Hennessy partner Brian Simmons said his firm wants to integrate Precise and Courtesy before making decisions about future investments.
LLS is 58 percent owned by Hicks Muse Tate & Furst - Kreiseder and Sommers own 31.5 percent. Officially, Precise purchased 100 percent of LLS, which includes Courtesy and sister companies Creative Packaging Corp. and Courtesy Sales Corp.
David Solomon, managing director with investment banking firm Goldsmith Agio Helms in New York, said the other finalist besides Precise that was recommended to the court was Pittsburgh-based Alcoa Inc. Solomon's firm handled the sale for LLS.
Whittling down bids
Before sending the two finalists to the court, LLS whittled the list of bidders to four, he said.
Hicks Muse had bid $105 million for Courtesy, but it was not among the final four, Solomon said. Courtesy founders Kreiseder and Sommers at one point submitted a tentative bid of $120 million, but withdrew it.
Solomon said the two highest bids were between $125 million and $130 million, but he said Alcoa was not among those two. Alcoa was a finalist because it had solid financing, he said. He declined to identify the other two of the final four.
Hicks Muse bought a majority stake in Courtesy in 1999 with much fanfare. The investment house said it planned to build a worldwide manufacturer for the health-care and packaging industries. But the deal never proved as fruitful as Hicks Muse had envisioned.
Sales for Courtesy dropped from $171 million in 1999 to about $140 million now, and LLS became embroiled in legal battles with Kreiseder and Sommers. LLS said Kreiseder and Sommers misrepresented Courtesy's financial health when they sold the firm. In court papers, LLS claimed that Courtesy did not disclose that some major customers, including Yang Sheng Tang, said they planned to cut back on business with Courtesy. LLS said that and other misrepresentations cost it more than $20 million.
Kreiseder and Sommers, through their lawyer, have denied those charges. The two men have said that LLS still owed them $20 million.
Their lawsuit has been settled as part of the bankruptcy sale. Under the deal, Solomon said Kreiseder and Sommers will get $7.5 million, and $12.5 million will be distributed to creditors. The parties plan to present the deal to the court Sept. 5.
LLS said in court papers that it paid Kreiseder and Sommers $245 million as part of the 1999 deal.
A statement from LLS and Precise said that 85 percent of LLS' lenders have approved the bankruptcy court agreement. Solomon said a few banks could not be reached as the deal was finalized just prior to the Aug. 22 court hearing, but he said the deal has enough support to be adopted and he said he does not see major obstacles.
Simmons said Courtesy has turned a corner in its declining sales: ``We feel as though the business bottomed out and stabilized late last year and early this year. We're pretty confident that the next couple of years will be pretty good ones.''