Tired of paying the price to maintain a publicly held company, rotational molding industry veteran Sherman McKinniss is teaming with Spell Capital Partners LLC of Minneapolis to take Rotonics Manufacturing Inc. private by the end of the year.
Rotonics, based in Gardena, Calif., has been publicly held for 20 years.
Under the plan, McKinniss will own 25 percent, and Spell Capital 75 percent. Shareholders will receive $3 per share. Just before the announcement, Rotonics was trading at $2.50 per share on the American Stock Exchange, and it rose to $2.90 on Aug. 31. During the past year, it has traded as high as $3.50.
Under terms of the agreement, McKinniss will remain president and chief executive officer.
``It's a big cost to be a public company and we decided that's not where we needed to be,'' McKinniss said in an Aug. 30 telephone interview. ``So we decided to take it private. There are so many uncertainties ... they keep adding to and adding to [under Sarbanes Oxley]. We'll run our business like we always have and save $1 million a year.''
The plan is subject to approval by Rotonics shareholders. A special committee of Rotonics' board unanimously approved the transaction. McKinniss said that the firm will continue operations at its nine rotomolding plants.
``Our goal is not to reduce anything, but to grow,'' McKinniss said. ``Spell is strictly a financial partner to take it private.''
Still, at age 70, McKinniss has to consider succession planning for the corporation. He started the company in 1973, leasing a building in Gardena and buying a rotomolding machine. In 1975, he bought out his partner and became the sole owner. In 1986, he attempted to retire.
``It didn't last long,'' he said of that attempt. ``There's no reason that I have to retire. Am I going to slow down a little and hand off things that I do? Probably. But I'll be around for a while.''
Talking about the succession planning, he said the company is looking both inside and outside the firm, but the take-private transaction needs to be handled first.
``We've got people around,'' McKinniss said. ``We've got a good talent pool of people capable of doing a lot of things. We've got people outside. We're looking both ways. But we need to get this behind us first.''
Spell Capital has several investments in the plastics industry, including Victor Plastics Inc. in Victor, Iowa; Copperfield LLC in Bremen, Ind.; and Midwest Plastic Components in Minneapolis. Rotonics represents its first investment in rotomolding, confirmed Dobson West, Spell Capital's senior managing director, in an Aug. 31 telephone interview.
``The day-to-day operations will be left to Sherm and his management team,'' West said. ``We are always looking for investments in the plastics industry. We don't have any right now [on the drawing board], but we're certainly looking for more.''
Like other plastics firms, Rotonics has been weathering increases in raw materials and natural gas prices during the past year.
For Rontonics' fiscal 2006, ended June 30, company officials cited exorbitant increases in raw material and natural gas prices that hampered it in 2006. It has expanded its refuse container, tank, materials-handling, agriculture and river and waterway products, amounting to $4.4 million, the company disclosed in its unaudited fiscal-year-end earnings results.
Its sales increased to $48 million from $45 million for fiscal 2005, largely fueled by increases in its major proprietary product groups.
The company also made necessary operational changes, including relocating injection molding operations from a facility in Miami to one in Bartow, Fla.
As part of that process, Rotonics refurbished existing injection molding equipment and installed a new, 350-ton press and ancillary equipment, officials said in the July 24 earnings release.
``At this point, we feel our gross margins will begin to improve now that the plant consolidation process is behind us as well as the prospect that raw material costs will be less volatile in the ensuing months,'' Rotonics said.
Rotonics came in at No. 10 on Plastics News' recent ranking of North American rotomolders, with nine rotomolding plants and 400 employees.