Major thermoformer Wilbert Inc. is working on an agreement to buy Morton Custom Plastics LLC.
The deal would hand Wilbert a good-size injection molding operation to pair with its growing thermoforming business. The Forest Park, Ill., company already owns thermoformer TPI of St. Paul, Minn., and it bought three Alltrista Corp. thermoforming plants late last year.
The five MCP facilities perform a mix of injection molding and thermoforming, with molding accounting for more than 80 percent of sales, said President and Chief Operating Officer Haskell Knight in a Nov. 1 telephone interview.
The sale, for an undisclosed price, faces a few hurdles. MCP's principal owner, Morton Industrial Group Inc. of Morton, Ill., asked that MCP file for protection from creditors under Chapter 11 of the U.S. Bankruptcy Code before completing the sale, Knight said. That way Wilbert can buy Morton's assets without taking on liabilities.
MCP planned to file Nov. 1 in U.S. Bankruptcy Court in Wilmington, Del. MCP's secured creditor, GE Capital of Stamford, Conn., signed off on the arrangement and gave MCP $2.5 million in debtor-in-possession financing to carry the company until the deal closes.
Another hurdle: MCP must hold an auction, now set for Dec. 15, for the company assets. Another buyer could outbid Wilbert, though Knight said he is ``99.9 percent'' certain that Wilbert will win.
Although MCP received four other letters of intent from possible buyers, Wilbert was the only party that wanted both the molding and thermoforming operations, he said. Wilbert's bid, which MCP would not disclose, far outpaced the field, he added.
Wilbert Chairman Curtis Zamec was in board meetings and unavailable for comment before deadline.
Knight said Wilbert and Harrisburg, N.C.-based MCP signed a definitive agreement Oct. 31. Knight, who came to MCP in February, said the deal achieves his mission of selling the company to a financially sound buyer. He rebuffed inquiries from several financial buyers, whom he said would want a faster return that could jeopardize ongoing operations.
Wilbert, a leading maker of burial vaults, has the cash flow to support MCP's long-term needs, he said.
``The nice thing about it is that our three injection molding plants today are making money and are not distressed plants,'' Knight said. ``But we had to fund losses from our thermoforming plants.'' Wilbert can add the struggling thermoforming business to its more successful operations and use injection molding to broaden work with existing customers, Knight said.
MCP's thermoforming business only recorded about $18 million in 2001 sales, Knight said. That business had been expected to contribute closer to $29 million. The facility in Harrisburg had lost business, partly from an aerospace supplier that had used MCP's tray tables and armrests.
The injection molding operation, on the other hand, continues to grow. It has lined up about $30 million in new business at three plants - in Harrisburg and Lebanon, Ky., and St. Matthews, S.C. - and is working with 262 new molds, he said.
Overall, MCP recorded about $100 million in sales for 2001 and expects flat growth in 2002, Knight said.
The sale does not include Morton Industrial's injection molding plant in West Des Moines, Iowa, which is financed and managed separately from MCP's operations.
Before the agreement, MCP faced some financing difficulties. In October the company defaulted on covenants for a $10 million line of credit from GE Capital. But Knight said that action was done in anticipation of the upcoming sale and a new, shorter-term loan from GE Capital.
MCP owes GE Capital about $30 million, much of it the result of MCP's 1999 purchase of three plants from Worthington Industries Inc. of Worthington, Ohio. In May, Worthington filed suit for cash it claims Morton Industrial owes related to a sales and service agreement.
The sale of MCP assets has no bearing on that suit, said an MCP spokesman. Worthington officials were unavailable Nov. 1.