Penda Corp. and Durakon Industries Inc. have merged to form one company with more than $150 million in thermoforming business.
The merger, announced Jan. 5, retains a stake in the joint company for both firms' private equity owners. The resulting company will operate under Penda's name and from its headquarters in Portage, Wis.
Details of the deal, including the percentage of ownership for each equity partner, were not announced. Lapeer, Mich.-based Durakon is the larger of the firms, with 2007 thermoforming sales of $106 million to Penda's $64 million.
Resilience Capital Partners, a Cleveland-based investment firm, purchased Penda in 2007. Littlejohn & Co. of Greenwich, Conn., has owned Durakon since 1999.
The two companies have been in talks for ``a very long time,'' said Penda President and Chief Executive Officer Ulf Buergel in a Jan. 7 telephone interview, but the weakening financial, automotive and credit markets made it difficult to bring the deal together.
Those same economic conditions, however, also raised the value of merging because it allows both firms to access new technology, retain existing business and focus on growing markets.
Both Penda and Durakon built their core operations on thermoformed pickup-truck bedliners. But with more automakers opting to install their own sprayed-urethane liners in-house, and with market share for trucks falling, both companies have been aware of the need to expand their product lines, Buergel said.
``It had to happen sooner or later,'' said Ed Bearse, a partner with Advanced Plastic Consultants LLC, a Lake, Mich., consulting firm specializing in heavy-gauge thermoforming. ``A lot of thermoformers are really hurting because the [recreational vehicle] industry has gone down. Everybody is looking at every penny.
``You're going to see some radical changes throughout the thermoforming industry.''
For Durakon, changes in the auto accessories market have led to an increased presence as a direct supplier to automakers by producing stone guards, running boards and cargo management systems for trucks and sport utility vehicles. The firm also has been a leading molder of thermoformed exterior parts using a paint-replacement film.
At the same time, Penda has been developing new business in the lawn and garden industry and has launched a water-management business with a high density polyethylene liner for irrigation ditches under the trade name SmartDitch.
Now both companies can expand on those capabilities, with Durakon's twin-sheet thermoforming expanded to Penda's lawn and garden customers, and Penda's composite expertise made available to Durakon's newly established auto contacts.
``The commonality of the two companies will still have the bedliners, but we can also build on second and third business technologies,'' Buergel said.
The new Penda will have three units: automotive accessories for bedliners and tonneau covers, automotive components for the direct auto parts business, and lawn and garden/water-management programs.
It also will retain existing Penda and Durakon manufacturing sites in Lerma, Mexico; Portage and Lapeer.
Together, Penda and Durakon will have the capacity and ability needed to jump quickly into new business once the economy improves, Bearse said.
``I have a lot of faith in these guys,'' he said. ``They can put all of their efforts into taking what markets are left and building on it.''
And a bright light for a very dark automotive industry currently may shine in thermoforming's direction, Bearse said. Thermoforming can get new products launched quickly and for less money than traditional injection molding, especially if automakers turn out smaller numbers of specialty vehicles. The technology was just beginning to gain acceptance from the auto industry when money started to run out for new projects.
``This may sound strange, but I believe that in the long run, the changes in the auto industry today will be to our advantage,'' Buergel said. ``There's going to be much shorter runs, and much more customizing of vehicles. Smaller runs will lead to more thermoforming opportunities because of the significantly lower tooling costs.
``This [sales] trough is a little deeper than we're used to, but [the industry] will come back. It may look a little bit different than it was, but we'll adjust.''