Martin Franklin admits to being a contrarian who does not follow accepted rules on acquisitions.
Franklin, the outspoken chairman and chief executive officer of consumer products company Jarden Corp., made his first unconventional move when he bought that company, then known as Alltrista Corp., for $160 million in April 2002.
Franklin, who also heads investment firm Marlin Partners II LP of Rye, N.Y., became disenchanted with the company's direction while sitting on Alltrista's board of directors.
At first glance, Alltrista did not seem like a plum company, said Franklin, who delivered a keynote address at the Plastics News Executive Forum, held Feb. 1-4 in Summerlin:
* The thermoformer and injection molder of consumer products was publicly held, but not followed by any Wall Street analysts.
* More than half its shares were owned by several unhappy and frustrated shareholders.
* The company suffered a botched acquisition and had management with no forward plan, according to Franklin.
Worse, post-Sept. 11, the manufacturing sector was not where a lot of investors wanted to spend their money, Franklin said. Marlin perused financial reports and talked to money managers involved with more than 50 companies before deciding to take the risk to buy Alltrista, he said.
``Our investment thesis was very much driven by the fact that old-economy companies were generally being ignored,'' Franklin said. ``We felt there was an opportunity to build a portfolio of nice consumer businesses before the tide inevitably turned.
``With the market's infatuation with growth rather than profits and cash flow during the Internet craze, the window of opportunity was open for investment in the kind of boring, mature businesses we were seeking.''
The risk to buy the ``boring'' has turned out well to date. However, it did not come without the sweat of fixing a troubled company. Almost immediately, the new owners closed the ``overstaffed'' Indianapolis headquarters of Alltrista, sold off part of its thermoforming business to Wilbert Inc., overhauled management and changed the company name to Jarden, Franklin said.
Then, British-born Franklin starting doing what he does best: acquiring companies. Deal making may even run in his blood, as his father, Roland, was a longtime, close associate of British corporate raider James Goldsmith.
The 39-year-old entrepreneur has a taste for it, having bought and sold an eyewear company and several others before Jarden. He began building a bigger company, acquiring companies that made such products as the FoodSaver home vacuum-packaging system and Diamond Brands toothpicks and matches.
Along the way, he also has added to a strong injection molding and thermoforming business under both the Alltrista Industrial Plastics and Unimark Plastics names. Unimark, the injection molding side based in Greenville, S.C., recently won Plastics News' 2003 Processor of the Year award.
While Unimark has been successful, so has Jarden. Franklin has spent about $500 million on six acquisitions since April 2002. The company recorded more than $700 million in sales last year with profit of more than $50 million. Jarden last summer was named one of the 200 best small companies in America by Forbes magazine, which dubbed Franklin ``master of the mundane'' for Jarden's odd collection of unexciting products.
Manufacturers never should be afraid to acquire other companies, especially when capital is cheap, he said. He seeks companies with solid cash flow and strong management, two factors that do not waver on any purchase, Franklin said.
He admonished those who do not take advantage of the acquisition window now open.
``It's a gold rush right now, in my view,'' Franklin said. ``There are businesses going somewhere and businesses going nowhere. Usually if you're going nowhere, things catch up to you.''
Another piece of radical advice from Franklin: He likes to keep manufacturing in North America. While others talk of moving work offshore, a sound base of production exists here, Franklin said. It's a fundamental advantage for injection molding to stay domestic instead of shipping from overseas, he said.
``It's a contrarian view today,'' Franklin said. ``I'm wary of even buying businesses in Europe without being comfortable with the managers. I'd rather keep my efforts in America.''
Jarden's efforts include a portfolio of companies ranging from home canning jars to penny zinc blanks to plastic cutlery and medical products. When Marlin Partners was acquiring shares of Alltrista, those products were not in demand as much as, say, an Internet property, Franklin said. The world view has shifted.
``We jokingly described our investment as the anti-Net, since it represented all that the new economy wasn't,'' Franklin said.