Updated Dec. 21: Global investment firm Platinum Equity has signed a definitive agreement to buy Husky Injection Molding Systems Ltd. for nearly $4 billion.
Platinum Equity, based in Beverly Hills, Calif., was founded in 1995 by billionaire and Detroit Pistons owner Tom Gores. The private equity firm, which has $13 billion of assets under management, is buying Husky for $3.85 billion.
The transaction is subject to regulatory approval and is expected to close in the second quarter of 2018. Reuters first reported Dec. 14 that Platinum Equity was in “advanced talks” with Husky after outbidding other private equity firms.
Husky, based in Bolton, Ontario, is currently owned by Boston-based investment firm Berkshire Partners LLC and the private equity arm of the Ontario Municipal Employees Retirement System, the pension fund for Ontario's municipal employees. Berkshire Partners and OMERS Private Equity Inc. purchased the injection molding machinery, robot and hot runner systems maker in June 2011 from Toronto-based private equity firm Onex Corp. for $2.1 billion.
Following the transaction, members of Husky's management team will remain “significant investors” in the business, the company said in a Dec. 18 news release. Husky President and CEO John Galt will stay on to lead the business. Galt has been CEO of the company since 2005.
“The value Husky has created is driven by a strong focus on strategy execution, which makes us a compelling investment,” Galt said in a Dec. 20 email interview. “We hold strong positions in markets that are growing. … We have a great track record of delivering value and have some exciting projects in the pipeline, both on the manufacturing front and with products in development.”
Given the company's Canadian headquarters, Galt said he does not anticipate the $1.5 trillion tax bill, which passed in the U.S. Senate Dec. 19, will have any “material impact.” The tax bill lowers the corporate tax rate to 21 percent from 35 percent and allows businesses to immediately expense the full value of investments in new facilities and equipment for five years.
Approximately 75 percent of Husky's sales are generated outside of North America, the company said. The company has two facilities in the United States: its hot runner business out of a facility in Milton, Vt., and a manufacturing facility in San Dimas, Calif., for Swiss medical mold maker Schöttli Group, which Husky purchased in 2013.
Mike Woollatt, CEO of the Canadian Venture Capital and Private Equity Association, said there is an increased interest in private equity firms pursuing businesses in the industrial and manufacturing sector.
“[The industrial and manufacturing] sector has climbed the ranks and is now the most active sector,” he said in a Dec. 21 email interview. “Some of the reasons are macro-related — strong economy, low corporate tax rates, skilled labor — and some have to do with specific sectors that are trending, like plastics.”
The Canadian economy has also been “growing substantially,” Woollatt added, with the country outpacing the seven leading industrial nations. The G-7 group includes Britain, Canada, France, Germany, Italy, Japan and the U.S.
“We see a lot of interest in Canada from U.S. [private equity] firms,” he said. “There is lots to be interested in, frankly: strong, skilled workforce, strong economy, stable government and regulatory regime, low corporate tax rates, lower dollar, a close and open trading relationship … with a huge market in the U.S.”
When asked about stagnant NAFTA negotiations between the U.S., Canada and Mexico, Woollatt said Canadian businesses, particularly those who are importing and exporting goods, are “watching it closely.”
“Many manufacturing companies are concerned about the potential impacts,” he said.
Husky's Galt said he is also monitoring any potential changes to NAFTA, but he is confident the company's global footprint and ability to flex between manufacturing sites will allow them to adapt to any changes. The next round of NAFTA negotiations will take place late January in Montreal.
Husky employs approximately 4,000 people worldwide at its manufacturing facilities in Canada, the U.S., Luxembourg, Austria, Switzerland, China, India and the Czech Republic.