After spending most of 2003 closing plants and deciding which businesses it would sell, PolyOne Corp. has shifted gears in early 2004 by purchasing the North American resin distribution business of ResinDirect LLC.
No purchase price was disclosed in the deal, which was announced Jan. 12.
The deal includes customer lists and some resin inventory, but does not include any warehousing facilities, PolyOne spokesman Dennis Cocco added. ResinDirect distributes material for BP Amoco plc, Nova Chemicals Corp. USA, Equistar Chemicals LP, Chevron Phillips Chemical Co., Huntsman Polymers Corp., Denka Inc. and Petromont SA.
Davidson, N.C.-based ResinDirect distributes about 60 million pounds of commodity resins annually in North America. Most of that material is polyethylene and polypropylene, but it also includes some polystyrene. In late 2002, ResinDirect officials said most of the firm's customers were injection molders and the average customer bought between 3 million and 5 million pounds of resin annually.
Louis Dreyfus Energy Services - ResinDirect's Wilton, Conn.-based parent firm - sold the operation to concentrate on its energy business, according to Bill Rippe, an executive vice president with Louis Dreyfus.
``We needed economies of scale by either building or merging with another firm,'' Rippe said Jan. 13 in a telephone interview. ``But opportunities in energy were more of a focus to us.''
ResinDirect is retaining its European and Asian resin distribution units, which handle more than 400 million pounds annually, Rippe added. Between 10 and 20 ResinDirect staffers are expected to join PolyOne, he said.
ResinDirect had handled commodity resin distribution for GE Polymerland - a resin distributor run by GE Plastics of Pittsfield, Mass. - for three years before taking direct control of the business in June. At that time, GE Polymerland customers began buying commodity resins directly from ResinDirect sales representatives.
GE Polymerland no longer is working with ResinDirect and will not be affected by the PolyOne deal, a GE Plastics spokeswoman said.
Avon Lake, Ohio-based PolyOne is North America's largest plastic compounder and is one of the region's largest resin distributors. In the first nine months of 2003, the firm's resin distribution sales were flat vs. 2002 at about $397 million. Pretax profit in that period also was basically flat at $9.6 million.
PolyOne has lost more than $175 million since the start of 2001. In that time, the firm has closed more than a dozen plants and cut more than 900 jobs. In October, PolyOne announced its intentions to sell three business units that generated sales of more than $600 million in 2002 and that employ more than 2,200.
``We've identified noncore businesses that are for sale, but at the same time we're looking for opportunities to grow,'' Cocco said of the ResinDirect deal.
For PolyOne, the deal ``is adding critical mass to our distribution business,'' said Michael Rademacher, PolyOne distribution vice president.
``This was an opportunity we were made aware of, and it was the right fit,'' he added. ``The fact that we had our own warehousing and logistics network also had a positive effect on putting the deal together.''
PolyOne also will be able to benefit by reducing stocking levels of resin from suppliers that it shared with ResinDirect, Rademacher said. Those customers include BP, Nova and Huntsman.
Capital projects that PolyOne's distribution unit completed last year - including moves into larger leased spaces in Statesville, N.C.; Ayer, Mass.; and St. Louis and opening a large warehouse in Rancho Cucamonga, Calif. - also enabled the ResinDirect deal to take place, according to Rademacher.
``If we hadn't made those improvements, which allowed us to have more space and availability, we probably couldn't have done this acquisition,'' he said.
Industry analyst Margaret Baumann said the move strengthens PolyOne's position against rivals such as Ashland Distribution Co.'s General Polymers unit.
PolyOne now can compete with GP for PE business from Equistar, said Baumann, president of G.H. Associates in Lebanon, N.J. PolyOne also gains commodity sales from Formosa, which is not served by GP, she said.
But Baumann also characterized the deal as ``an incremental improvement'' that at most will add $25 million in annual sales to PolyOne's total.
She also estimated that PolyOne probably paid no more than $30 million for the ResinDirect business.
``In some cases, [PolyOne] may just be gaining business at accounts they already had, but at least it shows they're willing to support their distribution business,'' Baumann said.