Reichhold Inc. executives have arranged to buy the business from Dainippon Ink and Chemicals Inc. of Tokyo.
Terms were not disclosed. The transaction, announced Sept. 12, is to close Sept. 30.
DIC has operated Reichhold as a wholly owned subsidiary since 1987 and was planning to restructure the business, but concluded that a sale was in the best interest of both firms. John Gaither, who had left Reichhold in 1998 after 32 years with the firm, returned in 2004 as president and chief executive officer and began assembling a team of former and current Reichhold executives for the buyout.
The relationship between DIC and Reichhold ``now takes on a different character, but we anticipate that it will continue to be a productive and cordial one,'' said Gaither, who previously had served as president of three divisions, chief operating officer and European operations chairman.
Under the agreement, DIC and Reichhold can pursue opportunities independently. Reichhold, based in Research Triangle Park, N.C., employs 1,600 and supplies unsaturated polyester resins, gel coats and bonding pastes.
Reichhold globally had a net loss of $229.1 million on 2004 sales of $975.8 million, according to a DIC news release.
The loss includes a $180 million write-off of goodwill. DIC agreed with the Reichhold CEO on the need ``to clean up our balance sheet,'' and that step was taken, he said in a telephone interview.
The remaining operational loss was ``significantly smaller than [Reichhold] losses in recent years,'' Gaither said.
Reichhold sales for 2005 should exceed $1 billion on slightly less shipment volume, Gaither said. ``We may have lost some [volume] in getting prices where they need to be. We have been pretty firm on them, particularly where returns were not that attractive. We need to get back to reinvestment economics.''
Reichhold turned a corner. ``In 2005, we are profitable year-to-date, but there might be some adjustments triggered by the acquisition,'' he said. ``Based on the purchase price, we will have to write down assets.''
The firm has secured a bank loan for working capital, Gaither added.
Under the sale, DIC will retain a Vienna, Austria, coatings operation that Reichhold now operates. That site is the oldest Reichhold family plant, going back to the 19th century, Gaither said.
DIC reported profit of $98.5 million on sales of $9.33 billion for the fiscal year ended March 31.
In cutting Reichhold loose, DIC and subsidiary DIC Investments Japan Inc. together intend to forgive $229.4 million out of $431.2 million of outstanding debt. Some of the balance will be paid upon closing and the remainder within three years, DIC said.
Reichhold will have 11 plants in the United States, Canada, Mexico and Brazil; four in Norway, England, France and Italy; and one in Dubai. Also, Reichhold has a toll manufacturing agreement in the Czech Republic.