Internal management changes and financial constraints have not prevented plastic beverage pallet maker PalWeb Corp. from acquiring a small competitor.
Dallas-based PalWeb paid $12.5 million to buy the assets of Greystone Plastics Inc., a manufacturer of a recycled-content plastic beverage pallets based in Bettendorf, Iowa. The deal, completed Sept. 8, will include $4.2 million paid in cash and the rest in assumed notes issued to Greystone, according to a release issued by PalWeb.
The acquisition gives the struggling PalWeb ``a material revenue stream,'' according to a PalWeb news release. Greystone also will give PalWeb the capacity to injection mold more than 1.25 million pallet pieces annually, with current production in 2004 estimated at more than 550,000 pieces, according to the release. The pallets made by Greystone use recycled polyethylene in a design that offers more durability than similar products, said PalWeb President Warren Kruger.
Greystone in March purchased a 60,000-square-foot building in Bettendorf and moved from nearby Princeton, Iowa. The company said at the time that it would operate four injection presses there and add to its staff of 35.
Greystone owner Bill Hamilton, who designed the firm's recycled pallet, declined comment on the acquisition when reached by telephone Sept. 10.
Hamilton was made senior vice president of production at PalWeb.
``Bill's pallet design is truly innovative and has proven effective and long-lived in an industry historically hard on pallets,'' Kruger said in a the release. He did not return a telephone call.
The purchase comes during a tension-filled time at PalWeb, founded in 1999 to make injection molded plastic pallets for a variety of industries and to sell molding equipment.
Early financing was supposed to be provided by a financial institution that PalWeb purchased, but that institution ran into its own financial difficulties. PalWeb now is financed entirely by entities controlled by Kruger and his brother, Paul.
Paul Kruger, the company's former chairman and chief executive officer, resigned his positions in January after giving PalWeb a $7 million credit line for continuing operations. Two other PalWeb board members resigned Aug. 25, while a new board member joined Sept. 8.
The company, publicly traded over the counter, has had difficulty obtaining outside financing, an SEC filing said.
To finance the Greystone acquisition and provide future funding, the company was issued a new series of preferred stock, bought $7 million in equipment and real estate and leased it back to PalWeb and converted $900,000 of debt and $7.5 million of preferred stock into common stock.
The company recorded sales of $980,900 for the first nine months of 2003, ended Feb. 28. In that period, PalWeb also reported a loss of $2.54 million. The company had 18 full-time employees before the acquisition.