A subsidiary of Sigma Plastics Group has bought the garment-bag assets of financially distressed Apple Plastics International LLC, creating a North American mega-supplier to the laundry and dry-cleaning markets.
On Feb. 12, Sigma sister company Alpha Industries Inc. of Lyndhurst, N.J., purchased the equipment at Apple's bag-making plants in Rancho Dominguez, Calif., Spartanburg, S.C., and Paterson, N.J., for an undisclosed amount, said Sigma Chairman and Chief Executive Officer Alfred Teo.
Sigma also leased the Apple buildings in Rancho Dominguez and Spartanburg, restarting the shuttered operations at those two facilities. The Paterson plant, formerly called Tiffany Extruders, will remain closed and the equipment eventually will be sent to other Alpha sites, Teo said.
The two bag facilities will have the name Epsilon Plastics Inc. and will be managed by Alpha.
The moves come after a lengthier-than-expected liquidation by Rancho Dominguez-based Apple, once owned by California extrusion leader Gary Duboff. The company ran into debt and cash-flow problems in December, leading to a bank loan default and asset assignment to Burbank, Calif.-based CMA Business Credit Services for sale or liquidation.
The sale to Lyndhurst-based Sigma was delayed several weeks when three creditors, led by Houston-based ExxonMobil Chemical Co., filed Chapter 7 involuntary bankruptcy proceedings against Apple in Newark, N.J. That case was dismissed Jan. 31 after lawyers for CMA objected.
``[The bankruptcy case] increased the costs for everyone involved,'' said CMA estate manager Mike Joncich. ``Sigma probably would have backed out of any offer to purchase the assets if it proceeded. Bankruptcy would have been too slow a process.''
The sale forms a Gulliver in garment-bag makers among the Lilliputians left in North America. Combining the garment-bag businesses of Alpha and Apple creates a company with the capacity to extrude more than 100 million pounds annually of linear low density polyethylene, Teo said.
The entire market for North American garment bags is only about 140 million pounds a year, he added.
``We hope to weed out the weaker players by gaining more economies of scale,'' Teo said. ``Many [competitors] are not selling on quality or service, but only selling on price. And pricing is so depressed right now that people are cutting each other's throats.''
Alpha also is battling a swell of low-price bags coming from China. The situation, magnified when Apple purchased three new plants in late 2001, helped drive Duboff's company out of business, Teo said. Duboff had worked for Sigma during the 1980s as vice president of sales for subsidiary Omega Plastics, Teo said.
Teo admitted that Alpha's garment-bag business is not performing as well as Sigma's other businesses, including Alpha's extensive PE stretch film, industrial film and trash-can liner operations.
``We've been losing money in the garment-bag business the last five or six years,'' he said. ``With consolidation, we hope to bring better performance.''
Sigma was the only company that made an offer for Apple, Joncich said. The sale allowed CMA to reach a settlement with Apple secured creditor Guaranty Business Credit Corp. of Dallas. The company was owed more than $13 million, although it reached an agreement for less than that, Joncich said. Other creditors will gain some payment from the sale of some Apple property holdings, including the former Power Plastics of Paterson, a film converter that Sigma did not purchase. That building will be sold to a company outside the plastics industry and the equipment auctioned off separately, Joncich said.
Apple recorded 2002 sales of $50 million, Teo said. About 120 employees are affected by the purchase.
The fate of equipment from Tiffany Extruders still must be decided. Sigma may open a new film extrusion plant in Texas later this year, possibly in the Houston or Dallas area, Teo said. If so, equipment from Tiffany and Alpha's Rancho Cucamonga, Calif., plant could be shifted there, he said.
The Alpha unit includes several garment-bag facilities in the Chicago area, managed by Wheeling, Ill.-based Aargus Industries Inc., and in Orangeville, Ontario, Lyndhurst and Rancho Cucamonga. Sigma recorded sales of about $850 million during 2002, Teo said.
The status of another of Apple's former businesses, resin distributor Quality Polymers of Los Angeles, is unresolved, Joncich said. A Los Angeles bankruptcy court has suspended an involuntary bankruptcy filing by creditors, and CMA is seeking a buyer for its office assets, he said.