One of North America's largest polypropylene compounding businesses might change hands later this year.
Ferro Corp. of Cleveland announced May 30 that it has signed a nonbinding letter of intent to sell its specialty plastics business to an undisclosed buyer. The unit posted sales of about $270 million in 2005, officials said.
A source close to the deal said the buyer is Wind Point Partners, a private equity firm based in Chicago. Officials at Wind Point and Ferro declined to comment on the buyer's identity.
The source said the sale price is around $140 million. Bids from competitors within the plastics market did not exceed $100 million, the source added.
Wind Point had owned thermoformer Alloyd Co. Inc. for 14 years before selling the firm in late 2003. Overall, Wind Point has invested in more than 80 companies since 1984. The firm currently manages almost $2 billion in investments from pension funds, endowments and individuals.
Ferro spokeswoman Mary Abood said the deal, which is expected to close in the third quarter, is being made because the specialty plastics unit ``falls outside of areas that are considered core businesses going forward.''
Specialty plastics ``is a nice growth business, but it doesn't fit when you look at [Ferro's] entire portfolio in terms of synergies and long-term market characteristics.''
In addition to its major PP compounding presence, Ferro's plastics business also produces color compounds, thermoplastic elastomers, gel coats and thermoset pastes. Its PP operation - based in Evansville, Ind. - supplies the automotive and appliance markets.
The Ferro plastic business has 11 plants, including sites in Evansville; Stryker, Ohio; Plymouth, Ind.; Edison, N.J.; Carpentersville, Ill.; Castell¢n, Spain; and Rotterdam, the Netherlands. The business contributes about 14 percent of Ferro's annual sales.
The unit employs about 770 worldwide. The Evansville plant employs 180 and has annual capacity of more than 200 million pounds on 14 single- and twin-screw extrusion lines. The site covers about 175,000 square feet of manufacturing space spread over three buildings.
Industry contacts said the move could be positive for the business, which some said has been ignored and underfunded by Ferro in recent years.
``Changing owners will give that business a sense of direction and allow it to grow,'' one contact said.
Another contact cited the unit's TPE business - operating as Advanced Polymer Alloys in Wilmington, Del. - and some key PP compound contracts it has for parts made by appliance maker Whirlpool Corp. as the most valuable pieces of its portfolio.
Ferro has struggled to restate its financial records since July 2004, when the company revealed a former employee had falsified more than $1 million in earnings and debt filings with the Securities and Exchange Commission.
The firm also has dealt with the sudden death of Chief Executive Officer Hector Ortino in late November. President and Chief Operating Officer James Kirsch added the CEO title at that time.