Germany-based injection molder Balda AG is dealing with a legal dispute with two managers — and former owners — of Balda's U.S. molding operations.
Bad Oeynhausen, Germany-based Balda announced Jan. 7 that it had relieved CEO Chuck Brewer III and Chief Operating Officer Michael Brewer of their duties at Balda C. Brewer Inc. in Anaheim, Calif., and Balda Precision Inc. in Oceanside, Calif.
Balda said the two subsidiary companies now will be managed by “existing managers from the Balda group.”
The change in leadership followed a Jan. 2 announcement that the former owners of C. Brewer had submitted arbitration claims against Balda on Dec. 31.
The dispute is apparently over a $5 million bonus that the Brewers expected to receive from the sale of the company.
According to Balda, the sellers claim Balda impeded their ability to earn what it called a performance-related price adjustment. The sellers are asking for $5 million, plus punitive damages and arbitration costs.
Balda's announcement did not specifically name the former C. Brewer owners who had filed the claims. But the principals in the business before Balda bought the U.S. plants on Dec. 31, 2013, were brothers Chuck and Michael Brewer.
At the time of the purchase, Balda reported that it had paid 33 million euros ($43.7 million) for the U.S. companies, which included a performance-related earn-out of 3.8 million euros ($5 million).
According to Balda, the arbitration claim is “unfounded and baseless,” but the company declined further comment.
However, on Nov. 7, 2013, Balda had announced that “conservative estimates” had led the company to an extraordinary write-off of $14.9 million for the U.S. operations. But the company added at the time that the adjustment would be partially offset by reducing the performance-based earn-out by about $4.3 million.
A major Balda shareholder, Elector GmbH, had insisted on checking the sustainable value of the acquisitions, according to German online news portal Finance-Magazin.
For Balda, the acquisition of the U.S. molders was part of its strategy to build its medical business, as it shifted away from the shrinking cell phone molding business. In 2008, when it was primarily serving European cell phone manufacturers, the company had annual sales of about 400 million euros. Now the publicly traded company is much smaller: in 2012-13 it had sales of 59.9 million euros, and it forecasts 2014-15 sales of 73 million to 78 million euros.
The historical comparison is revealing. In April 2006, Balda had talked about being “at the heart of the mobile phone boom” by investing in Asian production and wanting to grow organically about 15 percent to a level of 450 million to 460 million euros in 2006.
The CEO of that time, Joachim Gut, even predicted “we will diversify and produce new products to increase our added value in current markets as well as to enter new markets. We are planning to do this also by buying into strategically well-positioned companies. Our target of revenues is 1 billion euros in the year 2010.”
Balda's core business today is medical molding, accounting for almost three quarters of sales, the remaining 25 percent shared by eye ware, automotive and electronics, plus a smaller agriculture market involvement with irrigation system components.
Supported by rising sales, the company is on an expansion path again, saying a new production site in Romania will start operations in 2015-16, and that it is “prepared to acquire a strategic partner to expand its operational platform and its global presence.”
Despite all the ups and downs, Balda has a long history, having been founded as a camera producer in 1908 before starting injection molding as its core business in 1952. This was followed by entry into the cell phone molding business in 1995, and placement of shares on the Frankfurt stock exchange in 1999.