DÜSSELDORF, GERMANY (Nov. 16, 12:40 p.m. EST) — Onex Corp. plans to take Husky Injection Molding Systems Ltd. private again, once Husky shareholders approve the Canadian private equity company's purchase of the machinery maker Dec. 6, an Onex official said.
“We expect to receive enough votes to approve the acquisition of 100 percent of the publicly traded Husky stock” at the shareholders meeting, said Anthony Munk, a managing director of Toronto-based Onex, in an e-mailed response to questions.
Onex announced it planned to buy Husky on Sept. 28 — just a month before the world's largest plastics trade show, K 2007. The price is about C$960 million (US$1 billion). Munk attended the Dusseldorf trade show, but he did not go to Husky's Oct. 25 news conference. He e-mailed his answers for this story after K 2007.
But Husky executives did answer lots questions at the news conference about the intentions of Onex, which owns operating companies with total annual sales of about C$33 billion (US$35 billion) and employ more than 227,000 people around the world. Onex is publicly traded on the Toronto Stock Exchange.
In Dusseldorf, Husky showed plenty of technological highlights, like in-mold labeling and molding four ice-cream containers at a time in a cycle time of less than three seconds, and a large Quadloc Tandem press, with built-in compounding extruder, molding automotive door carriers.
Trade press reporters asked more questions about the pending ownership change than about machinery.
How long does Onex normally hold onto their investments? A “much longer time” than typical private equity owners, said John Galt, Husky's president and chief executive officer.
Mike Diletti, vice president of service and sales for Europe and the Americas, said Onex “has a history of holding companies over the long term, and growing the companies that they own.”
In recent years, an average of five years of ownership has been the common answer when private equity firms have purchased plastics machinery makers. But Munk, in his written e-mail responses, echoed the Husky executives.
“We have historically held our investments longer than the average private equity firm, with some investments in our current portfolio that were made over 10 years ago,” he said. “We believe that Husky is a very positioned asset in the plastic injection industry, given its global reach, and its strength in machines, molds and hot runners. We think that there is a tremendous opportunity to build Husky.”
Husky reported record sales of $1.1 billion for its fiscal year 2007, ended July 31. Husky generated a profit of $41.7 million — at a time when several major machinery makers are losing money.
What can Onex, and Husky management, do to improve that financial performance? Munk said the consistent profit margins have resulted from Husky's tradition of investing money in technological innovation to create what he called “industry leading solutions” to customers. “Additionally, Husky's management team has a number of productivity and sourcing initiatives in process, and we expect these initiatives to continue to deliver results in the future.”
At the K news conference, reporters asked Galt and Diletti what skills Onex brings to the company. They said Onex is a financially savvy firm, with huge financial resources, that sometimes has helped companies to grow very quickly.
“They have specific experience in acquisitions,” Diletti said in Germany.
Plastics News later asked Munk whether Onex will make related acquisitions after buying Husky. How aggressive will Onex be?
Munk said Husky is a solid company right now, but he did not rule out future deals.
“We believe Husky's product pipeline, as well as the fundamentals in Husky's key end markets, particularly in PET, provide a strong underpinning for organic growth for Husky. We will evaluate acquisition opportunities as we come across them.”
Shadow of Schad
When Onex does take Husky private, it will end 10 years as a public company. Schad, who founded Husky in 1953, announced shortly after NPE 1997 that he would take the company public. Husky's stock began trading on Oct. 9, 1998, on the Toronto and Montreal stock exchanges.
Schad retired from Husky in 2005. He remains chairman.
Husky shareholders are expected to approve the sale to Onex when they meet Dec. 6 at Husky's Advanced Manufacturing Center at company headquarters in Bolton, Ontario. One shareholder, Natcan Investment Management Inc. of Montreal, has publicly opposed the deal and wants Husky to remain public, or at least hold out for a higher price. But the sale has the approval of Robert Schad and his wife, Elizabeth Schad, who own or control 44.08 percent of the shares.
The Schads have agreed to accept less money per share than other shareholders, so that the others could get a price closer to Robert Schad's target price for Husky.
Schad earned a reputation as a hard-charging machinery expert and someone who supports charitable causes, especially environmentalism. Munk said Husky's values will not change with the new ownership.
“We firmly believe in Husky's values and management and we will continue to build upon Robert Schad's legacy,” Munk said.
Husky's K 2007 booth carried on the Schad legacy of innovation. Here are some highlights:
* A HyPAC injection press demonstrated super-fast in-mold labeling, as the press with 300 tons of clamping force, whipped out a 250-gram rectangular container in a four-cavity mold, on a 2.9 second cycle. A Muller side-entry robot placed the full-wrap label, with a separate label on the bottom, into the mold, and removed the polypropylene container, running a visual check, then onto a part stacking mechanism.
Jim Overbeeke, business manager of packaging, said Husky's new Ultra Packaging hot runner allows designers to give the part a very thin wall section of 0.29 millimeter. The container weighs just 6.5 grams, versus the industry standard of just below 8 grams, he said.
The cycle time is 10 percent faster than the current standard, Overbeeke said.
* On a car, the door carrier is the inner “skeleton” of a car door that houses components such as the lock, window guide, arm rest and stereo speakers. At K, Husky was molding both left and right door-carrier modules on a single shot, with a 1,350-ton Quadlock Tandem press, equipped with an integrated Coperion twin-screw compounding extruder. By feeding the glass rovings directly into the extruder, then into a shooting pot before injection, the machine molds parts with longer fiber lengths, said Karl-Heinz Hoefert, Husky business manager of automotive.
“On many of the cars still today, the carriers are made out of steel, by the stamping process,” Hoefert said. “This allows us to basically mold these carriers — which have to take side impacts — with glass-reinforced polypropylene, and have a much higher level of integration by using the injection molding process.”
In-line compounding can cut material costs by 35 percent, versus buying the precompounded resin, he said.
A six-axis Fanuc robot removed the door parts, trimmed off five gates, and stacked the carriers.
At K 2007, Husky announced that door-system specialist, Brose Fahrzeugteile GmbH & Co. KG of Coburg, Germany, has purchased a Husky in-line compounding system to make a door-module carrier.
* Husky demonstrated a new high-performance package for its HyPET machines, molding a 12.1-gram PET preform for a 500-milliliter water bottle on a 5.5-second cycles, on a 96-cavity mold. Without the special package, cycle times ranged from 6.5 to 7 seconds.
The package is the result of refinements to the entire system, including mold, robot, injection unit, clamp and auxiliary equipment. “None of these improvements by themselves would result in significant cycle improvements — it is only when you get them all working together that they have a real effect,” said Jeff MacDonald, Husky's vice president of beverage packaging.
Husky announced that its fiscal 2007 marked a record year for orders of preform molds and injection presses to mold them. Orders increased more than 13 percent over 2006.
* In other PET-related news, Husky announced it is investing $10 million to boost its mold conversion and refurbishment services — for converting to lightweight bottles and new short neck finishes. Husky, which claims to be the world's largest provider of PET mold conversion work, already has converted more than 18,000 mold cavities for a variety of thread sizes. One customer is Southeastern Container Inc.
In a related move, Husky launched Flex Mold, a modular, low-cavitation preform mold to help customers reduce both conversion costs and mold changeover time.
* In hot-runner news, Husky introduced a new six-zone, mold-mounted temperature controller added to its Altanium controller.
Husky picked up the Altanium line when it bought Moldflow Corp.'s Manufacturing Solutions Division earlier this year. The six-zone is ideal for low-cavitation hot runners.
Husky also said it has extended its Pronto line of quick-ship hot runners to include high cavitations, now offered as 12-drop to 96-drop systems. Previously, they only came as single-, two-, four- and eight-drop systems.
The company also displayed a new synchronized valve-stem technology for its Ultra 350, 500 and 750 hot-runner nozzles, to boost consistency and repeatability. Husky also showed the UltraFlow valve gate for faster color change, by mixing the melt before it enters the mold cavity; and Long Fiber hot runner systems for auto parts.