A plastics materials deal has taken shape on the streets of Calgary, Alberta, with resin maker Nova Chemicals Corp. selling its performance styrenics business to building-products maker PFB Corp.
Both firms are based in Calgary. The deal includes Nova's expandable polystyrene resins and Arcel-brand styrenic copolymers.
Nova will acquire an equity stake in PFB as payment for the business, but officials declined to disclose the size of that stake. Nova also will hold two seats on PFB's board of directors, and Robert Snyder, Nova performance styrenics vice president, will become PFB's chief operating officer.
The deal represents an upstream integration move for PFB, which operates in Canada as Plasti-Fab Ltd. Its primary products are insulating building products made of materials made mostly from EPS, but also from concrete and wood.
PFB had been one of Nova's EPS customers, Nova spokesman Pace Markowitz said in an email. PFB also makes some of its own EPS for internal use at a plant in Crossfield, Alberta. Markowitz added that the sale “is not a consolidation acquisition, it is part of PFB's strategic plan to grow and elevate the industry through vertical integration.”
Acquiring the Nova businesses provides PFB with increased integration in EPS foams. In a May 11 phone interview, Vice President and Chief Financial Officer Stephen Hardy said “expertise in EPS foams is [PFB's] core competency.”
Hardy added that Nova's EPS production will meet all of PFB's internal needs, but running the business also creates the possibility of PFB becoming a material supplier to some of its competitors.
PFB now will operate Nova resin plants in Monaca, Pa., and Painesville, Ohio. The Monaca plant employs about 250, while the Painesville plant employs about 50.
In 2011, PFB posted sales of C$89.2 million — an increase of more than 25 percent vs. 2010.
Nova — one of North America's largest polyethylene makers —rang up sales of US$5.2 billion last year, up 13 percent from 2010. Nova is wholly owned by International Petroleum Investment Co., a state-owned firm based in Abu Dhabi, United Arab Emirates.
PFB's financial performance has been improving because of improvement in the North American building and construction market. “We're seeing a slow recovery coming out of the recession, but it is improving,” he said. “Based on the general indicators that we follow, we're cautiously optimistic.”
PFB makes EPS-based products at nine plants in Canada, as well as at a plant in Blissfield, Mich.; and at a plant in Lebanon, Ohio, that it acquired in April from Knauf USA Polystyrene Inc. The 44-year-old firm also makes wood-based products at plants in Michigan and Idaho.
In addition to the 2011 sales gain, PFB's profit more than doubled last year to C$3.2 million. The firm generates more than 80 percent of its sales in Canada.
In an email, market analyst Phil Karig said the Nova-PFB transaction “looks like a good deal for both parties.”
“From PFB's perspective, even though they currently manufacture their own EPS their capacity is pretty small … and they have to buy the balance of their requirements from EPS producers,” wrote Karig, managing director of Mathelin Bay Associates LLC in St. Louis. “The Nova EPS capacity will allow them to be more than self-sufficient for their current internal EPS requirements.
“In addition, Nova's product slate will allow PFB to offset some of their exposure to the cyclical construction markets that constitute the core of their business and diversify through EPS-related sales into less-cyclical markets such as packaging,” he added. “From Nova's perspective, this allows them to concentrate their efforts on being more of a pure polyethylene producer.”