Industrias Vassallo Inc. of Ponce, Puerto Rico, has acquired resin furniture and wall decor maker Syroco Inc. of Syracuse, N.Y., for an undisclosed amount.
The Sept. 1 transaction more than doubles Vassallo's sales and nearly triples its square footage, with injection molding facilities in Corona, Calif.; Siloam Springs, Ark.; and Syracuse. Syroco also maintains a small sales office in Peabody, Mass.
Vassallo's sales will rise from the $42 million it recorded in 2003 to $100 million. Vassallo will gain 300 employees, bringing its total to about 670, and will have annual throughput of 300 million pounds of resin. Processing operations include extrusion, injection molding, blow molding and rotational molding.
The 42-year-old, family-owned Vassallo partially financed the deal through a $40 million loan from the Western Bank of Puerto Rico. That loan also will finance an unrelated expansion at Vassallo's headquarters site.
``A lot of clients told us that we needed a bigger presence [in the United States] in order to be a bigger player,'' President Rafael Vassallo said in a Sept. 1 telephone interview. ``Vassallo has always been a leader in the plastics industry, and we must work hard to continue being at that level [by] maximizing production efficiencies, lowering production costs and growing sales.''
Syroco has a strong distribution and sales network with the movers and shakers in the retail industry, including giant Wal-Mart Stores Inc., Home Depot Stores Inc., Target Corp., Lowe's Home Improvement Stores and Walgreen's.
``For many years, the United States has been putting industries in Puerto Rico,'' said Salvador Vassallo, chief executive officer. ``This is the first time that a Puerto Rican manufacturing firm goes global, and I'm proud to do that. You don't know how happy I am to do it. I'm arriving here in Syracuse right now, and we're ready for action. I was worried because we were in a race [to acquire Syroco] with Keter [Plastics Ltd. of Herzliyya, Israel].''
Syroco will keep its name and operate as a wholly owned subsidiary of Vassallo. Salvador Vassallo will serve as president; Rafael Vassallo will add the title of executive vice president of Syroco. Bruce Masden, who has been Vassallo's executive vice president of sales, marketing and business development, will head up sales and marketing for Syroco.
``Now Vassallo is a well-rounded company,'' Rafael Vassallo said. ``This will be hands-on management, administered by the family. We are immersed in a global economy that gives form and challenges to the goals of any company, so it is necessary to make aggressive but assertive decisions.''
Officials have worked the past few years to diversify Vassallo's plastics processing platform. Last year, the company acquired the assets of Ersplas Inc., a blow molder in Humacao, Puerto Rico. Vassallo picked up two blow molding machines in that deal and now makes drums sized from 5-60 gallons at its Ponce site for companies like Pfizer Inc., PepsiCo Inc. and Coca-Cola Co.
``We're trying to add blow molding capacity here in the States, too,'' Salvador Vassallo said. ``Because of the location, we're thinking about Arkansas. [That's] the best location for distribution purposes. But that is something we have to study.''
By early 2005, the company will add a new, 100,000-square-foot building to its Ponce campus along with two additional blow molding machines. For its fittings business, officials will add one Engel 1,000-ton injection press by the end of the year, either in Arkansas or Ponce. Syroco already has 43 presses with clamping forces of 700-3,500 tons. In Ponce, Vassallo operates 23 presses of 120-2,000 tons.
``We do have limited capacity to produce fittings and furniture,'' Rafael Vassallo said. ``What we want to do is mainly concentrate on patio furniture and complement our line of fittings.''
Salvador Vassallo said Syroco has lacked an international strategy.
``We will first install an international division,'' he said. ``I want to focus heavily on export.''
Syroco never was a core business for Fiskars Brands Inc., officials said. Parent company Fiskars Corp. of Helsinki, Finland, bought Syroco in 1999. Fiskars alluded to possible rationalizations in its 2003 annual report, when it called its plastic products segment a ``problematic area'' that had negative impact on overall company profit.
In that report, Fiskars said it planned to outsource more manufacturing and rationalize projects. According to the annual report, sales of outdoor resin furniture fell and the business showed a loss for 2003. Fiskars officials would not comment on Syroco's performance for the past few years.
``Our core business is branded hand tools,'' said Anita Loch, Fiskars Brands senior vice president-administration, based at Fiskars Brands headquarters in Madison, Wis.
``The resin furniture business was never one of those that fit the portfolio. We felt in looking for a buyer, where there would be a good strategic fit, it made sense for us to do this sale,'' she said.