Canadian private equity giant Onex Corp. announced Sept. 28 it plans to spend about C$960 million (US$957.6 million) to buy Husky Injection Molding Systems Ltd., a Bolton, Ontario-based maker of injection presses, robots, PET preform molds and hot runners.
Onex, one of Canada's biggest corporations, will pay C$8.18 per common share for Husky. That price is a 38.6 percent premium over Husky's closing price March 7, the last trading day before Husky said it was considering a sale or merger.
Husky's stock closed Sept. 27 at C$7.58, the day before the deal was announced.
The sale has the blessing of Robert Schad, who founded Husky in 1953, and is the largest shareholder. When Husky announced its strategic review, Schad told Plastics News he would play a major role in deciding any new owner, saying, ``I don't want to throw it to the vultures.''
In a news release announcing the deal, Schad called Onex ``the right long-term home for Husky.''
Schad and his wife, Elizabeth Schad, own or control 44.08 percent of the shares. The Schads have signed ``an exclusive and irrevocable voting agreement'' that they will vote the 47.7 million common shares they own in favor of selling to Onex. They also agreed to vote 3.97 million shares controlled by them in favor of the agreement.
Schad, who is Husky's chairman, said: ``When we began this process six months ago, my primary concern was to ensure that my stake in Husky would go to the right owner.
``Having concluded the review process, I am convinced that Onex is the right long-term home for Husky. They have shown a solid appreciation of Husky's strategy and strengths, and bring expertise in a number of areas that will help take the company to the next level.''
Husky's board unanimously recommended that shareholders accept the offer. The companies expect the deal to be approved by mid-December.
John Galt, Husky's president and chief executive officer, also said Onex will help Husky grow. ``I am confident in Husky's long-term strategic direction,'' he said.
Husky got bids from ``numerous interested strategic and financial investors,'' according to the news release. Husky had hired Citigroup Global Markets to handle the strategic review.
Toronto-based Onex is a diverse conglomerate. Its operating companies work in heavy industry such as vehicle transmissions, aerospace and avionics, electronics and services such as health care and entertainment. Its most recent acquisition, in partnership with Carlyle Group, was Allison Transmission from General Motors Corp., in a deal completed Aug. 7.
The operating companies have annual sales of C$33 billion ($29 billion) and employ 227,000 worldwide.
Other recent deals for Onex included Eastman Kodak Co.'s health group, Raytheon Aircraft Co., steel mills service provider Tube City IMS Corp. and a minority stake in Australia's Quantas Airways Ltd.
Publicly traded on the Toronto Stock Exchange, Onex is well-known in Canada, but not as big a name in the United States. However, the investment firm rocketed to fame earlier this year, when widespread news reports said Onex was working with Canadian automotive supplier Magna International Inc. in an ultimately unsuccessful attempt to buy the Chrysler division of DaimlerChrysler Corp.
Anthony Munk, managing director of Onex Partners, called Husky ``one of Canada's premier manufacturers and a globally recognized industry leader.''
Munk did not return a telephone call seeking further comment.
Husky is known far beyond Canada. The company employs about 3,400 worldwide, at its Bolton headquarters and more than 40 service and sales offices in more than 100 countries. Husky runs manufacturing in Canada, the United States, Luxembourg and China.
Like other plastics machinery manufacturers, Husky has struggled through a difficult period, especially in the North American market. But Husky has improved its sales and earnings steadily.
Husky, which releases its financial numbers in U.S. dollars, eked out a tiny profit of $2.1 million in fiscal 2005. In 2006, the company generated profit of $25.7 million on sales of $953.3 million.
On Sept. 28 - the day the Onex deal was announced - Husky reported it had topped the $1 billion sales barrier and generated profit of $41.7 million. Husky's fiscal year ends July 31.
The Onex purchase is the latest in a string of private equity deals to buy plastics machinery manufacturers. Machinery analyst Eli Lustgarten said plastics equipment companies are available at ``relatively attractive prices,'' because of the problems facing the sector.
``There's a lot of private money going into the plastics machinery business. Those are the people that are willing to step in at this point,'' said Lustgarten, senior vice president of Longbow Research of Independence, Ohio.
Lustgarten said companies like Husky have good brand names, established sales bases and a large number of machines in the field. Investors also see plastics as a growing market, he said.