Plastic Systems LLC has completed a deal to buy Millennium Plastics Technologies LLC of El Paso, Texas, saving 175 jobs and keeping open a plant that was slated to close by the end of June.
The purchase, completed June 2 for an undisclosed price, marks the third acquisition for Romeo, Mich.-based Plastic Systems in two years and doubles the size of the injection molder and mold making company.
It also brings the firm a base in the Southwestern United States that can help it reach customers in Mexico - a goal it was aiming to hit in 2009.
Plastic Systems has grown into a company that can run a successful business turning out parts for the high stress auto industry, while also creating a specialty in acquiring and turning around firms on the brink of closure. The company that began in 2001 bought PME International LLC of Swartz Creek, Mich., in 2006, and acquired the assets of Innoplas Corp. of Kenton, Ohio, in 2007 just days before that molding firm was slated to close.
But the purchase of Millennium Plastics added a new level of complexity, with the firms forced to work within a three-week deadline to successfully complete the deal, said Chief Executive Officer Steve Belleville in a June 4 telephone interview from El Paso.
Millennium - which specializes in designing, tooling, molding and assembly of electronic components - already had one acquisition deal fall through. It had told officials in Texas it would close by the end of June if it couldn't find another buyer, and its customers were getting ready to move work to other suppliers.
In Romeo, Plastic Systems was one of the molding firms invited to bid on Millennium's parts when Millennium's president, Tom Talboys, contacted Plastic Systems to see if the company might be interested in buying the entire firm.
``I had heard about [Belleville] and his company and gave them a call,'' he said.
Millennium was in the right area, had the right products and was the right size for Plastic Systems, Belleville said, but there was one major issue both companies had to consider. The deal would not work without Millennium's existing customer base - the same customers who were contacting Plastic Systems and other firms to take over work from El Paso.
Customers were reticent to give Plastic Systems time for an extensive acquisition process, though, since they needed time to move work before Millennium closed, if the two companies couldn't reach a deal.
Belleville and partners Ingo Pridoehl, Mike Kelley Sr. and Mike Kelley Jr. consulted Plastic Systems advisory board - which includes Citizens Republic Bancorp, lawyers from Southfield, Mich., law firm Seyburn, Kahn, Ginn, Bess and Serlin PC, and insurance backers from Cambridge Underwriters Ltd. - and gave themselves a deadline of June 2. If there was no deal by then, customers would still have time to move work before Millennium closed.
But the deadline gave the firms only three weeks to complete due diligence and negotiations as well as complete a purchase.
``We had a very, very rapid, but lengthy due diligence of 18 hours,'' he said. ``By its very nature, acquisition is complicated, but we were both anxious to get this done and overcome the time hurdle.''
The two firms had one marathon negotiation session of 20 hours straight at one point, Belleville said. Its bankers, attorneys and insurance group responded with a fast turnaround of documents and support the company needed.
Likewise, Millennium's management company and owners had to agree to the same fast-paced process, Talboys said. At the same time, its employees continued to hit production standards, even setting company best standards for quality and delivery in May, when they knew their jobs could end within weeks.
Plastic Systems' newly hired director of human resources, Karen Rabine, had to figure out how to integrate those 175 new employees from Millennium into the 165 now within the company. And at the same time, the company had to finalize a stabilization plan to ensure it could smoothly integrate Millennium and bring its operation up to speed quickly. The stabilization plan already was under way within hours of completing the deal, Belleville said.
The addition of Millennium will double Plastic Systems' employee base, but Belleville noted that each past acquisition also has doubled the firm.
Plastic Systems should hit $30 million in sales for 2008 and grow to $50 million in 2009, up from earlier estimates of $18 million for this year.
Millennium brings Plastic Systems some new customers as well as a new region for molding and complete mold making, and the firm is not done growing yet. The company will look for growth in the Southeast for its next expansion, possibly in 2009.
``They're an interesting company,'' said Jeff Mengel, a partner with consulting group Plante & Moran PLLC with offices in Chicago. ``The management team is filled with some very sophisticated veterans in the industry. They're pretty sharp.''
The purchase of Millennium will help to put the company on the map in terms of size and geographic location, and successfully building on the deal will give the firm a good reputation with customers and potential acquisition targets in the future.