Hoover Materials Handling Group Inc. has sold its blow molding assets to Mauser-Werke GmbH & Co. KG, considered the largest European player in plastic drums, and plans to focus primarily on steel containers.
The acquisition carves away more than half the sales of Alpharetta, Ga.-based Hoover, leaving it with one plant making intermediate bulk containers from metal and from rotational molded plastic. Aggressive competition and wafer-thin profit margins forced Hoover's hand, said marketing director Douglas Silverman.
``We had a lot of challenges to overcome with [plastic drums and IBCs],'' he said. ``A combination of factors made it very tough.''
Mauser, based in Brhl, Germany, viewed the purchase from a rosier vantage point. The firm gains four U.S.-based blow molding plants and a large step forward into the North American market.
Until this acquisition, completed Aug. 20, Mauser operated a single plastic container plant in North America. But the market for plastic drums and IBCs has grown significantly in Europe and is expected to slope upward in similar fashion in North America, said Mauser Chief Executive Officer Stefan Mller-Arends on Aug. 20.
``Why should the U.S. market be different than the European market,'' he asked. ``It should end up the same way in Europe and the United States. There's been a trend away from fiber [containers] to plastic drums and IBCs. That is why Mauser needed a clear foothold in the U.S.''
The deal, terms of which were not announced, includes the sale of Hoover's blow molding facilities in Mount Vernon, Ohio; Anniston, Ala; Charlotte, N.C; and Pine Bluff, Ark. The two latter plants blow mold plastic drums, while the others focus on the blow molded IBC market.
The containers, made of high density polyethylene, transport chemicals and other sensitive materials. The plastic drums typically hold about 55 gallons of material, while the heavier-duty IBCs can transport between 275 and 330 gallons, Mller-Arends said. Most of the containers are made using extrusion blow molding machines that feature large accumulator heads.
In North America, about half of the current drum production is made from wood fiber, while steel containers account for 40 percent and plastic only 10 percent of the market, said Peter Mooney, president of Plastics Custom Research Services of Advance, N.C.
Mooney, who is releasing a new multiclient study on plastics for material handling, said the plastic IBC business is growing in North America, The lightweight containers are economical, sitting within a galvanized-steel cage for strength and on top of a shipping pallet. The plastic drum business has been more difficult, he said.
``The drum business is really tough but Mauser is the largest-selling drum producer in Europe,'' Mooney said. ``Hoover already was licensing their technology and their designs. So the purchase could be very good for Mauser.''
The company will be up against firm major competition in North America, he added. Among the market leaders for plastic drums and IBCs are Grief Bros. Corp., Russell-Stanley Corp. and Schutz Container Systems Inc.
The four Hoover plants recorded about $60 million in sales last year, Silverman said. Mauser already owns Vanguard Container Corp., a maker of plastic drums in East Brunswick, N.J., that recorded about $10 million in sales, Mller-Arends said. Both operations will be placed under a new operating company, Mauser USA Inc., which was founded a month ago, he said.
Mauser USA will have about 190 employees, Mller-Arends said. The parent firm, also a maker of extrusion blow molding machinery and steel containers, did about $320 million in sales last year, he said.
Some in the industry expected Mauser's deal. In May, New York-based One Equity Partners, the investment arm of Bank One Corp., bought the company. The cash infusion helped Mauser execute its strategy to grow its packaging segment in North America, Mller-Arends said.
``Our strategy has been to go to markets that are more attractive at getting us to a reasonable size,'' Mller-Arends said. ``In our business, you have to do that through acquisition. The U.S. market is a natural for us.''
Hoover had a license agreement with Mauser to use its blow molding technology, Silverman said. That made a deal a good fit, allowing Hoover to exit a business that had been difficult on the bottom line, and to focus on stainless-steel IBCs.
The company will continue to operate its plant in Beatrice, Neb., maintaining production of the rotomolded plastic IBC's, a smaller niche market, Silverman said. Hoover also makes a material-handling line for dry products.
After selling the blow molding assets, Hoover will record sales of $30 million to $40 million this year, he said.