Custom injection molder Diversified Plastics Inc. has been bought by its employees through an employee stock ownership plan.
Employees purchased the company effective Nov. 1 but James Dow, president, CEO and co-founder of the Minneapolis-based company, will remain as president, the firm announced Jan. 4. Dow has a three-year contract to remain on board with an option to renew.
“The changeover has been smooth,” said Diversified Vice President Annette Lund. “We're in the middle of a five-year plan and are continuing to follow those long-term goals.”
The plan includes highlighting medical, lithium battery and filtration markets with an eye to expanding into aerospace, Lund said in a telephone interview.
Diversified specializes in high-precision molding. It employs more than 50 in its 45,000-square-foot facility. Lund said sales grew 24 percent last year to $8.3 million, and a further 17 percent hike is targeted this year.
“Knowing that someday I would eventually retire and have to sell the company, the most obvious direction would have been to sell to an outside organization,” Dow stated in a news release. “But, I found that prospective buyers had no desire in continuing the company; their only interest was our customer list and equipment. That meant, in all probability, our employees would be out of work. Setting up the ESOP was meant to prevent that from happening.”
Dow learned about ESOP programs eight years ago at a seminar when he was planning for retirement. He and Chief Financial Officer Roger Vang decided at that time that the company wasn't ready for an ESOP plan. When Diversified continued growing they decided to revisit the option.
“We automatically vested all the employees who were here at the start of our 2011 fiscal year,” Vang said in a news release. “Going forward, any new people will be vested like a typical 401 vesting schedule and base salary will determine the trust assets distribution schedule.”
The 35-year-old business offers design assistance, mold construction, intricate molding and clean room assembly.
Lund said her firm is unusual in that it has a high proportion of women in its senior ranks in sales, engineering, quality control and production.
Diversified has 16 presses with clamping forces of 50-550 tons. Its latest press added last October is an electric-hydraulic hybrid and the firm plans further expansion in 2012. It runs a Class 100,000 clean room for assembly and expects to add a white room this year for electric-press molding.
Dow and William Cullen founded Diversified in 1977 with 13 employees and three injection molding machines in a rented, 2,300-square-foot manufacturing space. Cullen is retired. In 1984 it added a mold-making operation that does captive and outside mold building.