Blow molder Russell-Stanley Holdings Inc. has filed for Chapter 11 bankruptcy protection as it prepares to be acquired by German industrial packaging group Mauser-Werke GmbH & Co. KG and private equity firm One Equity Partners LLC in a $96.4 million cash transaction.
Russell-Stanley of Bridgewater, N.J., filed Aug. 19 in U.S. Bankruptcy Court in Wilmington, Del. It operates 10 blow molding facilities in the United States and Canada, where it makes high density polyethylene industrial drums ranging from 5 gallons to more than 55 gallons.
Bruehl, Germany-based Mauser and One Equity Partners, a unit of JP Morgan Chase & Co., have formed a joint venture known as RSH Acquisition Corp. to buy the business. Mauser already has U.S. blow molding sites under its Mauser USA Inc. unit, with plants in Anniston, Ala.; Charlotte, N.C.; East Brunswick, N.J.; Mount Vernon, Ohio; and Pine Bluff, Ark.
Russell-Stanley's bankruptcy filing was required under the acquisition agreement, a spokeswoman said Aug. 24. The company said it expects to continue to operate normally, with management intact and no impact on operations. One Equity Partners will hold the majority share.
Russell-Stanley will not rely on debtor-in-possession financing, its lawyer, Mark Chehi, said in an Aug. 23 telephone interview. It will use cash collateral from senior lenders to fund operations during the restructuring.
The search for a buyer started in 2002, according to court documents. Officials continued to search for a buyer through 2003 with no success, and restarted the search in 2004. The company considered a total of five proposals over several years.
Ronald Litchkowski, Russell-Stanley president and chief executive officer, said in a news release the deal will give his firm additional resources, and he called Mauser a ``global leader in industrial packaging.''
For Mauser, it's a homecoming of sorts. Nearly 20 years ago, it licensed the technology for its L-1 55-gallon plastic tight-head drum manufacturing to Russell-Stanley. The acquisition, officials said, will allow Mauser to sell plastic drums using its technology directly throughout North America for the first time.
In 2003, Mauser acquired the plastic drum manufacturing operations of Hoover Materials Handling Group Inc. Now operated as Mauser USA Inc., the group makes the L-1 drum in parts of the Southeast, according to court filings.
``This acquisition enables us to supply our U.S. customers with an expanded range of products and a nationwide coverage of all key locations,'' said Stefan Muller-Arends, Mauser Group's chief executive officer.
The industry has seen its share of consolidation during the past few years, and the latest move is more of that, industry officials said.
Mauser itself views the acquisition as a way to consolidate worldwide. The firm is a player in intermediate bulk containers, which are taking market share from drums.
Drums historically have been made from steel, plastic or fiber board. Players in the plastics arena include Greif Bros. Corp. of Delaware, Ohio, and Schutz Container Systems Inc. of Selters, Germany.
But the market has been affected by several factors, including rising resin prices and competition from rigid and flexible intermediate bulk containers.
Russell-Stanley said in its court filings that its customers base purchasing decisions on price, quality and service, and increasingly seek to maintain relationships with fewer suppliers - those that can provide a range of industrial containers at competitive prices, often on a national or international basis.
The sale should be finalized with an Oct. 3 hearing confirming the reorganization, Chehi said.
