Graham Partners Inc. has purchased PVC window extruder Chelsea Building Products — and an executive said the private equity firm wants to buy more makers of plastic residential building products.
“We're actively looking for more acquisitions in the building products space, both new-product acquisitions and add-on acquisitions, and we actually think that plastics is a great area within building products,” Rob Newbold, a managing principal at Graham Partners, said in a telephone interview.
Graham Partners bought Chelsea from Tessenderlo, Belgium-based chemical company Tessenderlo Group, in a deal announced July 25. Terms were not disclosed.
Chelsea is one of the larger U.S. extruders of profiles for windows and doors, through its single plant in Oakmont, Pa., north of Pittsburgh.
Tessenderlo has annual sales of about $50 million, the company said in a news release. The Oakmont plant employs 180.
Graham Partners, based in Newtown Square, Pa., a suburb of Philadelphia, buys midsized manufacturing companies with sales between $30 million and $500 million. Graham Partners is affiliated with Graham Group of York, Pa.
Tessenderlo Group bought Chelsea Building Products in 1996. Tessenderlo now is focusing on the core areas of chemicals for food and agriculture, bioresiduals and water management through its plastic pipe business.
“Chelsea Building Products has recovered strongly after the economic crisis, and offers good growth prospects. However, in this business, we remain a small player and we are not able to reach a market-leading position on our own,” Albert Vasseur, Tessenderlo Group's director of plastics converting, said in a statement.
The U.S. construction sector is still in the dumps, thanks to a glut of unsold homes and the large number of foreclosed homes still on the market. Sales of residential windows fell for several years, before plunging in 2009. In 2010 and so far this year, the market is slowly picking back up again, according to the American Architectural Manufacturers Association, which tracks the pace of window and door sales.
Newbold said Graham Partners takes a long-term, buy-and-hold philosophy to its manufacturing investments, and does not pile on lots of leverage.
“Construction is one of our core focus areas. And at this stage, we think it's a great time for a private equity firm to make acquisitions in this space, because of where we are in the housing-start cycle,” he said.
Annual single-family housing starts are running at the rate of 450,000 a year. Newbold said the longer-term average is about 1.1 million starts. “We're not projecting that we get anywhere near the level of where we saw housing starts at the peak, but we do think that, over the next several years, we'll return to housing starts more in line with the long-term average, which would be more than double where they are today,” he said. “We think we're at the bottom and there's plenty of room for growth.”
Chelsea marks Graham Partners' first acquisition in vinyl windows. But the firm has bought several other plastic building products companies in recent years, including Nailite International Inc. (now Exteria Building Products), Infiltrator Systems, HB&G Building Products Inc. and National Diversified Sales Inc.
Newbold said plastic building products continue to take market share from traditional construction materials such as wood. Energy-efficient vinyl windows hold the largest share of the overall window market, for both new construction and remodeling.
One holding of Graham Group, called Graham Architectural Products, makes aluminum windows for commercial buildings. Recently, plastic machinery manufacturer Graham Engineering Corp. in York has starting making pultruded glass-fiber-reinforced windows for the sister company Graham Architectural.
Newbold said that, although Graham Group and Graham Partners are affiliated, the ownership and management of the two window businesses will remain separate.
Newbold said Chelsea Building Products has “an experienced management team, a committed and talented employee base and long-term successful partnerships with their customers.”
Chelsea President Peter Dewil said Graham Partners will help the vinyl window maker to grow and implement its strategy.