A struggling New York state plastics manufacturer is selling its production facilities as part of a $5.7 million venture into bioplastics with a new Maryland company.
Source Bio-Plastics Inc. of Bethesda, Md., will acquire Michelex Plastics of Massena, N.Y., a maker of injection molded packaging products for the optical disc industry, officials from both companies confirmed March 25.
Robert Rood, president and chief executive officer of Source Bio-Plastics, said the deal includes four buildings totaling 72,000 square feet owned by Michelex Corp., the parent company of Michele Plastics and Michele Audio, as well as an adjacent warehouse owned by the St. Lawrence County Industrial Development Agency.
The agreement calls for Source Bio-Plastics to have a 75 percent share and Michelex a 25 percent share of the resulting operations. Michelex President Thomas Gramuglia did not return calls and an e-mail requesting comment.
In a March 27 telephone interview, Rood said his company will use existing Michelex molds and machinery to develop green products, such as biodegradable CD and DVD cases and drinking water bottles, using new resins that combine soy-based materials with nanoparticles.
``The more and more we went around, the more we saw an out-of-the-box opportunity to bring about a green-minded company with the focus on using nanotechnology,'' he said. ``I really liked the opportunities that I saw with nanoparticles, their ability to either add strength or biodegradability to things.''
Rood did not have specifics on the equipment Source Bio-Plastics will acquire as part of the deal, which he expects to close by May 15.
State and local agencies have granted the project a $4.5 million incentive package, including wage and investment tax credits. About $1 million is from a loan from the Empire State Development Corp., which is conditional on the new venture creating 175 jobs in Massena by 2012.
Patricia Pitts, a spokeswoman for the Empire State group, said the deal will keep a longtime local company from leaving New York's North Country region, which recently has suffered losses in manufacturing. A General Motors Corp. engine plant in Massena is being shuttered this year, with the loss of about 500 jobs.
The region is home to several plastics processors, including extruder Chapin Watermatics Inc. and blow molder Roth Industries Inc., both of Watertown, N.Y., and specialty molder Champlain Plastics Inc. of Rouses Point, N.Y.
``It appears that the plastics industry is alive and well in the North Country,'' Pitts said.
Michelex has faced a sharp downturn in recent years, with sales slipping from $17.7 million in 2003 to $2.9 million in 2006, the last year for which Securities and Exchange Commission filings were available. In 2006, company officials predicted a net loss of about $1 million, compared to a loss of $3.9 million in 2005. On Wall Street, Michelex has been a penny stock since early September 2007. The company's stock reached its highest point in five years on March 1, 2004, when it traded at 63 cents per share.
Michelex in recent years has sought financing from several banks to keep its operations going.
Rood, who also is president and CEO of the alternative energy company Source Energy Systems and the financial services firm Kore Holdings Inc., said he became aware of Michelex about two years ago, when he was seeking partners for his new bioplastics venture.
Michelex in 2007 announced plans to acquire Ag Pro Ltd., a Massena-based soybean and oilseed crushing plant and refinery with potential crushing capacity of 250 tons per day and oil-refining capacity of 50 tons per day oil. In a Feb. 8, 2007 release to investors, Gramuglia made reference to the then-ongoing negotiations with Source Bio-Plastics.
``I am very excited about the prospects ahead for the company,'' he said. ``We continue to expect to have a presence in the plastics, biodiesel and zero trans-fat oil markets in the future.''
According to estimates on several investor Web sites, Michelex employs about 15 in Massena, its headquarters since the company was formed in 1972. Rood said the town, which is on the banks of the St. Lawrence River near the U.S.-Canadian border, is the perfect location for a bioplastics startup.
``You need an area like Massena [with] low-cost power, high skill-set people, an established company,'' he said. ``It's like the perfect storm up there.''