Equity investment firm Graham Partners Inc. has purchased Supreme Corq Inc., in a deal expected to help the synthetic-cork maker grow in a rapidly evolving industry.
Both companies had been looking for partners. Kent, Wash.-based Supreme Corq has been shopping for a buyer to bring the capital it needs to keep pace with expanding demand for plastic wine corks.
Graham, based in Newtown Square, Pa., was looking to add to its portfolio of plastics-based companies that convert customers from other materials, said Joe May, a managing principal at Graham Partners.
``We had already identified this sector as one for us to invest in,'' he said in a telephone interview. ``And so when this business became available, we had already been educated on the growth opportunities from the very beginning. We took advantage of that immediately.''
Graham's other properties include Nailite International Inc., a maker of polypropylene home siding panels that substitute for cedar wood shingles, and National Diversified Sales Inc., a producer of plastic draining and irrigation products that substitute for cast-iron and concrete brands.
The June 7 acquisition, terms of which were not disclosed, includes two plants in Kent with about 60,000 square feet of space and a printing and coating facility in Tournai, Belgium, that opened in April. The company, with about 80 employees, had been seeking capital to help it grow in a market moving at jack-rabbit speed, Supreme Corq spokeswoman Joyce Steers-Greget said June 8.
``It allows us to accelerate our product portfolio development and geographic expansion,'' Steers-Greget said. ``This business didn't even exist 10 years ago. Now, about 10 percent of all driven closures for wine are synthetic.''
Driven closures are those wedged into a bottle, as opposed to a twist-off top. The number of driven closures already is huge: According to estimates, about 22 billion of the wine closures were made last year, and plastic closures rapidly are gaining ground on tree-bark corks.
Boston-based research firm Investor Group Services said synthetic closures are growing at a 20 percent clip annually, a figure that Graham's May quoted as a reason for the firm's interest.
``We think that the penetration for this product can nearly double over the next few years,'' he said.
Although the company does not claim to have invented plastic corks, Supreme Corq officials said the company helped invigorate the industry after opening its plant in 1994. Founder Dennis Burns was an entrepreneur who started other injection molding businesses for hockey helmets and sunglasses before leaving each for new ventures.
The thermoplastic elastomer corks are cost-effective and don't affect the taste of wine the way natural corks can, Steers-Greget said.
Legend has it that on a visit to vineyards in the Napa Valley area of California, Burns spied plastic-made bungs, or stoppers, on old wooden wine barrels, Steers-Greget said. When he asked why a wood bung was not used, he was told that the tree bark tainted the wine by adding a naturally occurring mold called TCA - or 2,4,6 trichloroanisole - that mutes the aromatics and deadens flavor. The corks also can mold, leak or disintegrate in the wine.
Burns started and then left Supreme Corq, opening the door for other investors to step in at the privately held company. The company now commands at least a 25 percent share of the synthetic cork market worldwide and does nearly three-quarters of its business outside North America, Steers-Greget said.
Supreme Corq's customer base includes more than 1,000 wineries, many of them considered ``new world'' vintners in such areas as Chile, South Africa, New Zealand and Australia. The firm would like to tap more ``old world'' European wineries and established U.S. retail brands, she said.
Graham's investment will help free cash for those goals, she added.
American Capital Strategies Inc., a fund based in Bethesda, Md., invested $17 million into Supreme Corq as part of the deal with Graham. The investment includes a revolving credit line, a senior term loan and senior subordinated debt.
Graham's equity fund has about $227 million in committed capital primarily for midsize businesses. The company is affiliated with Graham Group, a holding company that founded blow molder Graham Packaging Co. LP and Graham Machinery Group, both in York, Pa., and still has investments in both.