Canadian extrusion house CPI Plastics Group Ltd. is acquiring England's Extrudawood International plc for C$11 million (US$8.4 million) in cash and shares.
CPI, based in Mississauga, Ontario, announced the deal April 7. It will acquire all remaining shares from Geoffrey House and members of his immediate family. The deal is expected to be finalized by April 15.
Under the deal, CPI will not acquire House's plant in Isle of Wight, England, where House extrudes window, door and roofline profiles, CPI President Ron Mitchell said in an April 7 telephone interview.
House also will be able to develop products for the United Kingdom market.
CPI and Extrudawood have had a licensing agreement since 1998. CPI held an 80 percent interest in Extrudawood's North American joint venture and a 75 percent interest in the international agreement.
``The structure of the previous deal prevented us from putting sufficient resources into marketing,'' Mitchell said. ``The royalty deal was taking a disproportionate share of the profits. It didn't allow for enough brand investment.
``It was a good deal initially. As it grew, it put some restrictions on us. We were able to negotiate a deal that was mutually beneficial.''
In 2003, CPI paid C$1.7 million (US$1.3 million) in license and royalty fees. Under the new agreement, CPI will be entitled to the continued exclusive use of the Extrudawood technology in North America and Mexico, through which it makes its eon-brand products for deck, railing, spa classing, blind slats and fencing. CPI will continue to pay license and royalty fees to the international sector, which will become a CPI subsidiary.
``The increased cash flow resulting from this transaction will be used to reduce additional debt assumed to finance this transaction, and to support other growth initiatives,'' Peter Clark, CPI chairman and chief executive officer, said in a news release.