Atlantis Plastics Inc. is breaking up its $400 million business, selling its films unit to AEP Industries Inc. of South Hackensack, N.J., and its molded products division to a private equity firm.
Atlanta-based Atlantis expects to close both sales in October.
The company filed Aug. 10 for Chapter 11 protection from creditors in a prepackaged deal with a consortium of lenders.
AEP will acquire all of the assets of Atlantis' film division which had 2007 sales of about $275 million in a cash deal valued at $87 million.
AEP Chairman and Chief Executive Officer Brendan Barba said in a news release that Atlantis' films operations complement AEP's portfolio. The film unit comprises three businesses stretch films, custom films and institutional products serving the storage, transportation, food-packaging and custom markets. Its six North American plants employ 750.
Standard & Poor's cautioned that AEP's ``largely debt-financed proposed acquisition has potentially negative implications'' on the company's credit.
S&P noted that AEP's purchase is subject to a bidding process, which ``could potentially result in AEP not acquiring the assets.''
The buyer of Atlantis' molded products unit, which has six U.S. injection molding plants, is a subsidiary of Monomoy Capital Partners LP, a New York-based private equity fund.
Monomoy partner Stephen Presser said the unit's footprint will remain unchanged for the present, although he hinted that some consolidation such as combining three plants in Elkhart, Ind., into one facility might be in the offing.
``Through nobody's fault, [molding] was a slightly disregarded part of the Atlantis operation for a number of years,'' Presser said Aug. 11 by phone. ``It's fundamentally a good business we can make it better.''
Presser said Monomoy is paying $26 million for the business, which generates annual sales of $130 million, and primarily serves the building products market with some specialty automotive business. Presser said it will be retooled to take advantage of the housing market.
``When the market rebounds, we'll be there,'' he said.
The Atlantis deal is Monomoy's second venture into plastics.
In 2007, the firm bought Kurz-Kach Inc., a Dayton, Ohio-based molder of temperature-sensitive thermoset parts for the aerospace, consumer and electrical distribution industries. Kurz-Kach has annual sales of about $80 million and operates five U.S. plants, a Brazilian factory and is about to expand its manufacturing operations into China, Presser said.
After failing to turn a profit in 2006 and 2007, Atlantis announced in January that it was hiring an investment banking firm to assist in evaluating alternatives, including a possible sale. Tim Burns, research analyst with Cranial Capital Inc. in Solon, Ohio, predicted at the time that Atlantis would sell its business units separately.
Burns said he welcomes the pending sales.
``It'll help consolidate the [film] industry, which is what [investors] wanted,'' he said.
Film and sheet makers like Pliant Corp. and Berry Plastics Corp. including Berry's Covalence Specialty Materials Holding Corp. subsidiary (formerly Tyco Plastics and Adhesives) have ``lost their luster'' due to high resin costs and being in too many end markets, Burns said.
``On the flip side, AEP was very confident about their position as a survivor and as a consolidator,'' he said.
He noted the company in April sold its last overseas operation to concentrate on North American production and sales of polyethylene stretch and shrink films and custom products. ``That's an example of a company focusing down on their core business and doing it very well,'' Burns said.
Atlantis' lenders, led by GE Business Financial Services Inc., are providing $26.5 million in financing so Atlantis can continue normal business operations until the divestitures are complete.
In its bankruptcy filing, Atlantis lists assets of $206.4 million and debts of $253.9 million. The three largest creditors, with claims exceeding $500,000, are the Bank of New York, Equistar Chemicals LP of Houston and compounder A. Schulman Inc. of Fairlawn, Ohio.