Intertape Polymer Group Inc. will take advantage of a decision by Tesa Tape Inc. to exit the retail adhesive-tape market by purchasing the assets of one of Tesa's plants.
Tesa, based in Charlotte, N.C., said Dec. 4 that it will focus on the industrial market for its North American business and get out of retail sales. The company will close its Middletown, N.Y., plant that makes retail masking and duct tape and lay off about 122 people. The plant is to close by Feb. 1.
Intertape will pick up those assets, primarily packaging production and slitting equipment, and will gain some Tesa customers. Montreal-based Intertape also signed a three-year supply agreement with Tesa's parent company, Tesa AG of Hamburg, Germany, to supply masking and duct tape to Tesa globally.
The agreements will add about $22 million in annual sales to Intertape, according to Intertape Chairman and Chief Executive Officer Melbourne Yull in a news release.
Intertape plans to integrate most of the tape operations into its Columbia, S.C., facility, the company said.
``It is an exciting opportunity to leverage our current manufacturing capabilities,'' Yull said in the release.
The deal, which was for an undisclosed price, was an easy one to make for Intertape, a company that dwarfs Tesa in size in North America, said equity analyst Michael Van Aelst of CIBC World Markets Inc. in Montreal. Van Aelst estimated that Intertape paid less than $10 million for the Tesa assets.
The customer additions could make the acquisition greater than its current value to Intertape, Van Aelst said.
Tesa had reasonable exposure to large home-retail stores, an attractive growth area for Intertape, he said.
For Tesa, the decision to exit the retail end also was not difficult, he said. By cutting its costs and reducing capacity, Tesa will be a better position to capture sales in the industrial market. The general tape market is weak in North America but could be gaining a little ground as the economy recovers, Van Aelst said.
Other players, including 3M Co., have cut jobs in that sector as a response to sluggish sales, he said.
While Intertape's size in the retail market makes it less vulnerable to slow sales, Van Aelst said, the Tesa plant was underutilized and not diverse enough to weather the slowdown.
``Tesa did not see a bright light at the end of the tunnel,'' Van Aelst said. ``They didn't have a lot of opportunities to increase volumes throughout the plant in the next few years.''
Intertape recorded sales of $463.6 million for the first nine months of 2003.
The company also makes paper-based packaging products and flexible intermediate bulk containers.