ATLANTA (July 12, 11 a.m. ET) — Custom extrusion firm Pexco LLC has made two acquisitions so far in 2011 and is planning to make more.
“We're looking elsewhere,” CEO Neil Shillingford said in a recent phone interview. “There are a lot of companies in this space.”
Atlanta-based Pexco bought Patrician Products Inc. — a maker of extruded plastic landscape edging in Hicksville, N.Y. — in April. Pexco then followed up in May by acquiring medical custom extruder Multitube Medical Devices SA de CV of Mexicali, Mexico.
Pexco previously had competed with Patrician in some markets, but hadn't competed much with Multitube, officials said. The Patrician plant in Hicksville was shut down at the end of May, with work being moved to other Pexco plants. Shillingford said that shipping product from the leased Hicksville facility to customers around the country was “a problem.”
No purchase price was disclosed in either deal. Pexco Chief Financial Officer Dennis Sink said in a recent phone interview that Patrician and Multitube each had annual sales of about $5 million.
Even before the recent deals, Pexco ranked as North America's 17th-largest pipe, profile and tubing maker, according to a recent Plastics News ranking, with related sales of $157 million. Pexco is owned by Saw Mill Capital Partners LP, a private equity firm based in Briarcliff Manor, N.Y.
“We've got two deals done, and they both add strength to our existing product lines,” Sink said. “From a custom extrusion standpoint, lawn edging [from Patrician] is a nice fit for us.”
Moving ahead, Sink said that Pexco has a goal of completing one or two such deals per year in the immediate future, with an eventual goal of increasing that deal number to three or four per year. The firm has been very active in the M&A field, working with a buy-side broker to identify potential targets.
Currently, Pexco officials are in due diligence for their next acquisition and are in serious talks with another target as well. These two were selected from a group of 34 “interested” targets that later was whittled down to 19.
In addition, 37 companies that were contacted by Pexco weren't interested in selling, and another 50 contacted Pexco about being acquired, but didn't fit what the firm was looking for. That makes a total of 121 companies that were involved in the search that will culminate in Pexco's next two additions.
Pexco will look at “fold-in” businesses as well as distressed opportunities, Sink said. The Patrician deal was a distressed situation because of the death of the firm's owner, he said.
Pexco also might find itself paying more for future acquisitions. Sink said that trailing 12-month earnings are improving at many industrial and manufacturing firms as the economic recovery continues. He declined to specify what Pexco paid for Multitube, but he said that it represented six times the firm's pretax earnings.
Shillingford said that Pexco has had “a nice and rewarding experience” in working with Saw Mill, which is interested in companies with annual sales ranging from $25 million to $200 million.
“Working with private equity can make you a little nervous, but [Saw Mill] has been very supportive,” he said.
Pexco was formed in early 2009, when British plastics and fiber maker Filtrona plc of Milton Keynes, England, sold its Filtrona Extrusion Inc. business to Saw Mill for $115 million. Saw Mill in late 2009 renamed the firm Pexco, which is the brand name of the firm's medical-tubing products.
Pexco's base business is on track for double-digit sales growth in 2011, thanks to “a lot of extra resources,” including better lead generation, Shillingford said. Major markets for Pexco's extruded products include custom aerospace, lighting, point-of-purchase displays, medical and fencing.
Growth in extruded products made from acrylic and high density polyethylene resins has been “most dramatic,” so far in 2011, Shillingford said. Pexco also makes products based on PVC, polystyrene, ABS and polycarbonate.
This growth also is allowing Pexco to create new jobs. The firm currently employs 1,000 at eight plants — six in the U.S. and two in Mexico — and expects to add 150 jobs throughout the company by the end of the year.