There seem to be two paths for the plastics machinery sector these days, at least in terms of accessing capital.
In China, we see companies going public, either via initial public offerings or by purchasing a public company. Many of the companies over there have enjoyed double-digit sales growth in recent years, as they've hitched a ride on China's rising economy.
But in the West, we're in an era of private equity ownership of many of the big machinery firms. Look at the big names acquired by private equity in the past few years - and keep in mind, most of them have at one time or another been publicly traded:
* The largest U.S. plastics machinery company, Milacron Inc., is still publicly traded, but Bayside Capital Inc., a Miami-based private equity firm, now owns a controlling interest.
* Husky Injection Molding Systems Ltd. is in the process of being acquired and taken private by Onex Corp.
* The biggest plastics machinery company in the world, Mannesmann Plastics Machinery GmbH, is owned by private equity firm Madison Capital Partners.
* Davis-Standard LLC, the largest U.S. extruder maker, is owned by a management group backed by Hamilton Robinson LLC.
* At K 2007 came the latest addition to the private equity bandwagon. Battenfeld Gloucester Engineering Co. was sold to a group of senior company managers with backing from Mousam Ventures LLC, a private equity firm in Kennebunk, Maine. The new owner is changing the company's name to Gloucester Engineering Co. Inc.
Why are private equity firms buying plastics machinery companies? It's tempting to say ``because no one else will.'' After all, with North American machinery sales in a seven-year sales slump, it's not the kind of investment opportunity that brokers get excited about.
But Independence, Ohio-based machinery analyst Eli Lustgarten put the trend into perspective after the Husky deal was announced, when he pointed out that plastics equipment firms have good brand names, established sales bases, a large number of machines in the field, and they're available at ``relatively attractive prices.''
Private equity owners can buy companies at a discount, wait a few years for a turnaround, and then cash in on the upturn. The only question now: How long will they have to wait?