Officials with PolyOne Corp. and Radici Group are excited about the potential of compounding deals just wrapped up by each firm.
Avon Lake, Ohio-based PolyOne bought New England Urethane Inc. in late December in a deal valued at $12 million. NEU, based in New Haven, Conn., provides high-performance engineered thermoplastic materials for the health-care market.
“We saw an opportunity to really drive our business and to get good technology that's well-known within the health-care industry,” PolyOne's Craig Nikrant said in a recent phone interview. “This move is very consistent with transforming our company into a specialty company, and transforming our specialty engineered materials business as well.”
NEU employs 25 and operates six compounding lines at a plant in North Haven, Conn. Its primary products are compounds based on thermoplastic polyurethanes used in medical tubing, catheters and similar products. PolyOne officials have said the NEU plant will remain open and its employees will be retained.
PolyOne is buying NEU from the three owners who founded it in the late 1980s. The owners will stay with the firm in a consulting role through 2010. The sale was prompted in part by the owners' need for economies of scale to grow the business, said Nikrant, PolyOne's vice president and general manager of specialty engineered materials. The purchase price is about five times NEU's estimated pretax profit for 2009, PolyOne officials added.
The acquisition is PolyOne's first since it bought thermoplastic elastomer compounder GLS Corp. in late 2007. In October, PolyOne sold its 50 percent stake in Colombian PVC compounder Geon Polimeros Andinos SA.
In the first nine months of 2009, PolyOne posted profit of almost $44 million, even as sales fell 32 percent to $1.5 billion vs. the same period in 2008. That nine-month profit was more than four times as large as profit from the year-ago period.
Nikrant added that there's a possibility that NEU materials could be made at other PolyOne facilities. He also did not rule out the possibility of the firm making more deals in the medical sector.
“We're always looking for, and interested in, companies with unique abilities,” he said.
For Radici Group of Bergamo, Italy, its $5.7 million acquisition of compounder/recycler Michael Day Enterprises Inc. provides 250 automotive certifications that can be used worldwide, officials said in a recent news release.
“This acquisition is certainly an important achievement for our group,” said Radici Group chemicals and plastics CEO Luigi Gerolla. “Thanks to this acquisition, we will be present locally in a notoriously conservative market that demands products made in the USA, and we will be able to acquire sizable market share.”
MDE compounds and recycles a variety of engineering resins, including nylon, polycarbonate and ABS. The firm — founded in 1981 by plastics veteran Michael Day, who retired in 2005 but remains MDE's sole owner — employs 84 and posted sales of almost $44 million in its fiscal year ended Sept. 30. MDE also installed new grinding equipment in 2007.
With the acquisition of Wadsworth, Ohio-based MDE, Radici “can take advantage of the synergies from the combination of our competence, know-how, and vertical integration of raw materials, and the American company's sales network and … local market experience,” added Danilo Micheletti, chief operating officer of Radici Group's North American plastic unit.
“MDE is well-entrenched in the American auto market and has 250 active automotive certifications that can be used worldwide, in Asia in particular, which will allow us to join the global pool of automotive suppliers.”
Gerolla added that he sees better days ahead for North America's auto market.
“Although the auto is a mature product, the automotive industry is still a strategic one,” he said. “Going forward, the U.S. auto industry needs to be a dominant force not only in the domestic market, but also on the international level.
“The U.S. government intervention in the auto market was, without a doubt, more well-thought-out than in Europe. It was aimed at rationalizing plants and capacity and promoting green policies that will lead to significant changes, starting with lighter autos featuring more and more plastic components.”
Radici has had a presence in the North American plastics sector since 1998. The firm previously had operated a compounding plant in Blacksburg, S.C., but closed the site in 2005 because of declining North American sales. Since then, Radici has supplied its North American customers with imported material. Company officials said plastic sales in the region have grown 45 percent since 2005. Radici also operates a plant making polymer-based Spandex synthetic fibers in Gastonia, N.C.
Radici has annual sales of $1.8 billion in plastics, chemicals and fibers and has worked with MDE as a supplier at various times. MDE had filed for Chapter 11 bankruptcy protection Nov. 10, citing assets and liabilities each valued at between $10 million and $50 million. Officials said at the time that MDE had been hurt by a decline in business, particularly from the auto sector, which makes up a majority of its sales.
The sale was approved by a judge in U.S. Bankruptcy Court in Akron, Ohio. No other qualifying bids for MDE were received, according to a court filing.
In a previous phone interview, MDE President Michael Cain said his firm “has done a lot of heavy lifting” in the past 18 months to preserve the company and continue supplying its customers.
The PolyOne-NEU and Radici- MDE deals illustrate the activity level in mergers and acquisitions of plastics materials firms. The number of such deals increased more than 30 percent globally between 2008 and 2009, going from 70 to 92, according to investment firm Blaige & Co. LLC of Chicago.
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