Making its second purchase in less than a week, Sigma Plastics Group has enhanced its trash-bag business further while helping to reduce the number of players in the crowded film and bag market.
On Oct. 5, the company purchased the assets of Mid-Atlantic Bag Inc., a distressed company that was under pressure from creditors, said Sigma owner Alfred Teo. Mid-Atlantic has closed its one plant in Thorofare, N.J., and will use the cash from Teo's company to pay its creditors, Teo said in a telephone interview.
``They can pay off all creditors 100 percent to the dollar and not have to go into bankruptcy,'' he said. ``We take over their equipment and customer lists, and it helps develop our trash-bag business.''
Sigma will move Mid-Atlantic's three monolayer blown film lines to Carlstadt and Lyndhurst, N.J., where the company's Beta and Omega units operate plants. The equipment, with large, 4½-inch extrusion heads, can produce 15 million pounds of polyethylene film annually, Teo said.
The company will hire three sales people from Mid-Atlantic, Teo said. The rest of the 50-person workforce will be laid off, he added.
Mid-Atlantic made trash bags for institutional uses, including schools and municipalities. The company, founded close to 15 years ago, had three principals: President Denny Naim, John McCullam and Alan Lafure, Teo said.
Lyndhurst-based Sigma's trash-bag business already is a major part of the large film extruder. Last week, Sigma bought Houston-based bag maker Republic Bag Inc., adding 60 million pounds annually of PE for trash bags and industrial film.
Together, the Mid-Atlantic and Republic purchases give Sigma a total of 150 million pounds a year in PE extrusion capacity for trash bags, nearly doubling the company's size in that area in just under a week's time, Teo said.
The film and bag industry still needs more consolidation, with several other companies struggling to survive, Teo said. The combination of a soft economy, overseas competition and thinning margins due to escalating resin prices have hurt many small producers.
``There are quite a number of companies in trouble that might not last long,'' Teo said.
Sigma has sidestepped that trend by offering larger volumes of film than many competitors, Teo said. The company also passes on resin price increases to customers, he said.
With several acquisitions under its belt this year, Sigma expects to break the $1 billion mark in sales for 2004, Teo said. Last year, the company recorded firm and sheet sales of about $935 million, he added. Sigma placed seventh in 2004 on Plastics News' North American film and sheet ranking.
Meanwhile, Teo faces insider-trading and fraud charges in separate indictments from the federal government and the U.S. Securities and Exchange Commission. The charges do not involve Teo's plastics businesses, and he is currently fighting those allegations. Teo has declined to comment on the investigation.