A surprise joint bid from plastic bag competitors Sigma Plastics Group and Vanguard Plastics Inc. came up aces in an Oct. 28 auction for cash-poor film and bag extruder Orange Plastics LLC.
Sigma and Vanguard have set up a joint venture, VS Plastics LLC, to run Compton, Calif.-based Orange, said Los Angeles-based lawyer Ronald Leibow, who is representing Orange in its Chapter 11 bankruptcy proceeding.
The companies bid $9.93 million to buy the assets of Orange, trumping the $9.63 million bid from EuroPackaging plc of Birmingham, England, Leibow said. EuroPackaging had hoped to buy the Orange facility as a foundation for its first West Coast packaging operation, Managing Director Afzal Majid had said Oct. 16.
The group from Sigma and Vanguard plan to keep the California plant open, employing about 187, Leibow said. Sigma Chairman and Chief Executive Officer Alfred Teo had said Oct. 12 he was considering buying the facility and then consolidating the operation into his two nearby California plants.
Vanguard also operates a Southern California bag-making plant in Rancho Cucamonga, Calif.
Officials with Lyndhurst, N.J.-based Sigma and Vanguard of Farmers Branch, Texas, were unavailable to comment after the bidding, held Oct. 28 through the U.S. Bankruptcy Court in Los Angeles.
The companies - among the largest bag producers in North America - apparently decided that sharing an interest in Orange was better than losing it to EuroPackaging or another bidder. Teo initially had said it might not be worth the money for him to spend more than $9.5 million on his own for Orange.
Yet, he added that he wanted to thwart the growth plans of EuroPackaging. The firm, a large film and bag extruder in Europe and Asia, recently purchased its first U.S. plant in Salem, N.H., from financially strapped Plassein International Corp. Majid said in mid-October that even if it lost its bid for Orange, it still would open a second U.S. facility.
The Oct. 28 auction contained some minor drama, Leibow said. Before the groups could bid for Orange, a motion by the creditors committee to delay the process was overruled by the court, he said. Orange owes the unsecured creditors about $10 million and its secured creditor, Chicago-based LaSalle Business Services, more than $12 million.
Orange entered Chapter 11 bankruptcy Oct. 6 after debt and slowing sales curtailed growth. The company recorded about $60.9 million in sales during 2002 but saw that figure drop to $39.3 million through early October of this year, according to a court filing. Orange had assets worth $21.2 million but liabilities near the $26 million mark.
Orange already had closed a plant in Crittenden, Ky., that it bought in 2001. The plant, which employs 64, was not included in the auction, Leibow said.
Orange was owned by a group that includes President and Chief Executive Officer Salim Bana, Chief Financial Officer Ken Frisbie and executive Vice President Carmelo Piraneo, according to a court filing. Company executives did not respond to telephone inquiries.
The purchase by the Sigma and Vanguard group further puts U.S. bag making in the hands of a few companies. Orange's Compton facility is one of the largest U.S. makers of extruded grocery and merchandise bags, both made from polyethylene.
Sigma ranked sixth among North American film and sheet makers, with related sales of $880 million, according to Plastics News figures.
St. Louis-based Vanguard recorded sales of $200 million for the fiscal year ended April 30, and has not been as active on the acquisition hunt as Sigma. The company is highly focused on grocery and merchandise bags, but also makes industrial film. Vanguard had seven plants before the acquisition.
Vanguard managing partner W.C. Seanor is heading the VS Plastics buyout team, said Leibow. Seanor, based in Garland, Texas, did not return an Oct. 29 telephone call seeking comment.