In a $22 million deal, PW Eagle Inc. has acquired Uponor ETI Co., a PVC pipe manufacturer in Denver.
The transaction gives Minneapolis-based PW Eagle a presence further East, with plants in West Virginia, Missouri and Texas.
ETI had 2002 sales of $89 million, and produces about 200 million pounds of PVC pipe annually. According to the deal, announced March 14, PW Eagle agreed to pay royalties of $8 million to $12 million during the next eight years to Uponor Oyj of Vantaa, Finland. The exact amount will depend on net sales of ETI's Ultra-brand PVC products.
``ETI is a leader in PVC pipe technology,'' said Bill Spell, PW's chief executive officer, in a news release. ``The Ultra products will permit us to differentiate our offering in a very competitive commodity business.''
He added that PW will use its distribution system to introduce Ultra products to new markets.
``The combination of the ETI Ultra products and PW Pipe system in the [West] will greatly strengthen both companies and make us a much stronger marketer of products in the waterworks segment of our business,'' Spell said.
The transaction gives PW a total of 11 PVC pipe plants, one polyethylene pipe plant, one plant manufacturing plastic water-meter boxes and one PE pipe distribution facility, officials said.
``While we have no immediate plans for manufacturing our electrical and irrigation products at the ETI facilities, we will certainly be exploring the possibility for marketing our electric and irrigation products in ETI's primary geographic areas,'' Spell said.
ETI's name officially will change to Extrusion Technologies Inc. It will operate as a stand-alone, wholly owned subsidiary of PW.
Industry officials talked about the deal all week, since PW first announced March 10 that it was negotiating with Uponor. Observers wondered how could PW make such a purchase when it had a $4 million net loss in 2002's fourth quarter on sales of $58 million? PW officials attributed that loss to ``normal seasonal slowdown experienced in the industry in the fourth quarter.'' By comparison, the firm reported a net loss of $5.6 million on sales of $48 million for its 2001 fourth quarter.
Others said it was surprising that PW had worked so fervently during the past 18 months or so to deleverage its balance sheet, only to take on more debt. In 2001, PW closed its facility in Hillsboro, Ore., and mothballed a facility in Phoenix, which remains idled. During 2002, the firm performed a sale and lease-back on several facilities and signed a refinancing deal that eliminated all defaults under previous agreements and reduced fixed charges.
Spell does have a reputation as a shrewd investor.
``If he sees the opportunity to buy assets at an attractive valuation, he'll buy,'' said Lee Schafer, an analyst with Blue Fire Research in Minneapolis. ``And if he sees the opportunity to sell, he'll sell.''
An official from Uponor Oyj did not comment on the PW deal, but did talk briefly about the firm's strategy. ``Our target is to [give the North American] portfolio less exposure to municipal [customers],'' said Jyri Luomakoski, Uponor Oyj's executive vice president and chief financial officer.
ETI and Aldyl, a maker of gas pipes with operations in Oklahoma, make up the Municipal Americas Division, which had $133 million in 2002 sales and 512 employees.
