Consumer goods maker Jarden Corp., which owns Unimark Plastics and Alltrista Industrial Plastics, will leap into small appliances and outdoor products - tripling its size - when Jarden buys the parent of Sunbeam, Oster, Coleman, Mr. Coffee and First Alert for $746 million.
The purchase of American Household Inc., announced Sept. 20, also vaults Jarden into a powerhouse position as a company that sources from Asia, since many of the company's kitchen appliances are made in China. But Jarden's chairman and chief executive officer, Martin Franklin, said some parts still are being made in the United States by custom injection molders - and he said Jarden will study moving that work to Unimark, its own custom molding unit based in Greenville, S.C.
``Unimark has a lot of molding. To us, it's just common sense, to the extent that Unimark has capabilities to mold,'' Franklin said by telephone. ``We'll look at it and we'll do what makes sense for the company.'' He said officials will base sourcing decisions on cost and other factors, such as proximity to end markets.
The much-larger Jarden also will have more leverage when buying resin and dealing with retailers.
Franklin said U.S. molders can be competitive in certain small-appliance work because labor is a low percentage of injection molding costs.
Also, under Jarden, Coleman will continue the U.S. blow molding of its coolers and jugs at two Kansas plants, in Wichita and Maize, Franklin said.
``They have a strong and viable business in the cooler area and we're committed to that business as part of this transaction. And we're backing that business. It will stay in the U.S.,'' he said.
After buying American Household, Jarden, which is traded on the New York Stock Exchange, will generate about $2.6 billion in sales, up from $900 million, and will employ 9,000. The deal is expected to close in the first quarter of 2005.
To help finance the purchase, Jarden announced private-equity firm Warburg Pincus LLC will invest $350 million in Jarden. Warburg's co-president, Charles R. Kaye, will join the board of directors of Jarden, based in Rye, N.Y.
Kaye called Franklin ``a successful and dynamic entrepreneur.'' Franklin burst on the scene in 2000 when he bought a stake in Alltrista Corp., which included thermoforming and Unimark injection molding. He became chairman and chief executive officer in 2001. Two years ago, Forbes magazine named Jarden one of America's best small companies. Last month, Fortune said Jarden was No. 19 on its list of America's 100 fastest-growing companies. Jarden's three-year annual rate of earnings per share grew by 99 percent, with a total return to investors of 109 percent.
Jarden has been described as a mini-conglomerate that owns companies making everyday consumer products such as Ball canning jars, the FoodSaver home vacuum-packaging machine, kitchen matches, twine and playing cards. Last year, Unimark did $100 million in custom molding sales of medical and consumer products from its six U.S. plants.
Unimark won Plastics News' 2003 Processor of the Year Award.
Jarden also runs a thermoforming plant in Fort Smith, Ark.
American Household is the former Sunbeam Corp., a Boca Raton, Fla.-based company that gained infamy under top executive Albert J. Dunlap, known as ``Chainsaw Al,'' whose management strategy was to acquire businesses, then slash thousands of jobs and close plants. He got the ax himself in mid-1998.
A few months before Dunlap departed, Sunbeam beefed up by purchasing Coleman Co. Inc., which makes camping equipment, coolers and other outdoor items; Mr. Coffee maker Signature Brands USA Inc.; and First Alert Inc., which makes smoke and carbon-monoxide detectors.
Sunbeam filed for Chapter 11 bankruptcy protection in 2001. The company changed its name to American Household and emerged from bankruptcy in late 2002 as a private company, with creditor banks as its main shareholders.
Franklin said American Household meets Jarden's strategy of holding the No. 1 or No. 2 position in its niche markets. Jarden also likes to keep debt under control, and Franklin said American Household pared down its debt during bankruptcy.
Sourcing from Asia was a big topic during a Sept. 20 conference call. Franklin told analysts that, before the Chapter 11 reorganization, the company was slow to move production overseas. One result: low profit margins.
But now Sunbeam has a staff of 50 in Hong Kong that manages its supply chain, including sourcing from China. Franklin said Sunbeam executives have done a good job of outsourcing to bring costs down in the price-sensitive small-appliance market. He called Sunbeam a ``completed turnaround'' that has established itself as a ``premier player'' in low-end small appliances.
At the same time, Franklin said Jarden does not have any plans to set up its own manufacturing in China. In other words, don't expect to see a ``Unimark China.''
In the mid-1990s, Sunbeam Products beefed up its internal molding operations by building a giant plastics factory in Hattiesburg, Miss. - only to shift gears soon afterward and increase outsourcing. When the plant closed last year, Sunbeam said it transferred molding to undisclosed processors in the United States and Mexico.
Franklin declined to identify the injection molders currently used by Sunbeam and its other brands.
Jarden's major existing kitchen appliance, the FoodSaver, is made in China. Unimark molds and assembles some FoodSaver accessories.
The Coleman business, during the past two years, has moved from being a solely domestic supplier to global sourcing, but has been slower to change than Sunbeam, Franklin said. Still, he told analysts: ``We think we're buying a business that's stabilized itself and is sort of in an upswing mode.''
Meanwhile, American Household's moves to source products offshore may be stabilizing. One stock analyst asked what percent of American Household goods are manufactured overseas today. Jarden Chief Financial Officer Ian Ashken said, ``I can tell you there's a lot more manufactured overseas than there was two years ago. But really, next year's going to be the end of that cycle. And I think by the end of the cycle, the majority will be manufactured overseas.''