When Eaton Corp. first owned the Synflex hydraulic hose and tubing business from 1978-87, the unit was not a good fit for the conglomerate.
Eaton had no other hose businesses at the time, so Synflex really was not part of its parent company's overall plan.
That clearly is not the case the second time around.
Eaton closed March 31 on the purchase from Saint-Gobain Performance Plastics Corp. for an undisclosed sum.
This time Synflex will help fill a product gap in Eaton's ever-growing hydraulic hose business. Synflex focuses on making thermoplastic hose and tubing using a range of materials, including thermoplastic elastomers and urethanes.
``We are always on the lookout for acquisitions that help us fill product gaps as well as geographic gaps,'' said Jeffrey Finch, general manager of fluid conveyance for Eaton's Maumee-based hydraulics operation. ``Thermoplastic hose was one of the areas we were interested in [to strengthen] our position, and Synflex became available, so we were successful in getting it.''
A solid business
With Synflex, Eaton acquired a firm that posted 2005 sales of about $120 million, serving such industries as transportation, beverage dispensing, fluid power and specialty applications. It employs 450 at four production sites, two in Aurora, Ohio, and one each in Mantua, Ohio, and Gembloux, Belgium.
Finch said Eaton had the sense Synflex might not fit with the broader Saint-Gobain enterprise, a situation not unlike that in 1987 when Eaton sold Synflex. And like many, Eaton has been on the acquisition trail. When a business like Synflex goes on the block, Eaton's likely to get a call.
``It's an extremely well-run company,'' Finch said of Synflex. ``It has a great product line, a similar customer base and similar channels of distribution to us, and it takes Eaton into some markets we're not in, like food and beverage and some specialty segments.''
Stephen Rawson, Synflex sales and marketing manager, started with the business in 1976 when it was still Samuel Moore. He has been through all the other acquisitions, first to Eaton and then to the former Fluorocarbon (later Furon) in 1987, and then to Saint-Gobain in 1999.
``This is the first time that Synflex has been owned by a company that's really in the hose business, and in the same kinds of markets that we've traditionally been involved in,'' Rawson said. ``It will be an exciting time at Synflex because of that fit and that synergy we're going to get being part of the Eaton organization.''
The sale certainly is not a reflection on the performance of Synflex, he said.
``The last three years we have been very successful,'' he said. ``The growth curve has been very good, very solid. It was more a reflection on the direction Saint-Gobain was going with its core businesses, which are glass and metal materials.''
Innovation always has been a strength of the Synflex operation, Rawson said, dating back to when the original Samuel Moore developed thermoplastic hose in the late 1940s and early 1950s. The firm pioneered such applications as air brake tubing, beverage hose and paint spray hose.
``Almost all of the thermoplastic designs out there are our designs and have been copied or tweaked by the competition,'' he said.
And Synflex still prides itself on its material expertise, especially taking standard materials and modifying them to gain specific performance traits, said Rawson.
Finch said the process of integrating Synflex into Eaton's hydraulics business could take 12-24 months. Teams from the two businesses will meet, share best practices, understand where there are business holes and overlap, and then sort through a solid integration plan.
``But primarily, it's business as usual,'' he said. ``Because it's a well-run business, it has customers to serve, and that's the focus. So we'll work through the integration issues in the back- ground while everybody continues to manage the customer base just like we always have.''
The two firms have a lot of shared distribution, which Finch sees as a strength. Now those distributors will be able to get a full line of rubber and thermoplastic products with one-stop shopping.
So far, response has been positive. ``A lot of times when companies make acquisitions, people say, `I wonder why they did that,''' Finch said. ``In this case, the reaction is, `That makes sense.' ''
Going for world leader
Eaton is no stranger to acquisitions, as it has made no secret that it wants to be the world leader in hydraulic hose and tubing.
Since it leaped into the hose field with the 1999 purchase of Aeroquip-Vickers Inc. for $1.7 billion, further deals brought Dana Corp.'s Boston Weatherhead business in 2002, Germany's Walterscheid GmbH in 2004 and China's Winner Hydraulics last year.
Eaton will continue to market the Synflex brand, as it has done with each of its prior acquisitions in hydraulics. ``I call it a stable of thoroughbreds,'' Finch said. ``It really is. Eaton obviously is the parent name and strong in its own right. But the product brands are great brands - brands that have been around for decades.''
Eaton does not break out its hydraulic hose sales. They are lumped in with the Fluid Power group, which posted 2005 sales of $3.24 billion, a 5 percent increase from the previous year. It generally is seen as one of the two leaders in the roughly $3 billion worldwide hydraulic hose business, along with Parker-Hannifin Corp.
Finch said he looks for even more consolidation in the industry, both at the manufacturing and distribution levels. ``It's simply a reaction to what the customer wants and what you have to do to remain competitive and profitable in the market.''
For Eaton's part, the firm tracks where it has geographic and product gaps, and will approach firms about an acquisition if it thinks the fit is right. And in a lot of cases, Eaton doesn't even have to make the first move; an investment bank will put together an offering package and send it out.
Finch said Eaton is in good shape from a product standpoint, but he sees Asia as a potentially dramatic growth area. ``We're looking in Asia, we're looking in Europe,'' he said. ``But obviously, based on what we just did with Synflex, we'll look right down the street, too, if it fits.''