German technology and automotive supplier Continental Corp. has completed its purchase of Italian thermoplastic hoses specialist Merlett Group.
The acquisition, originally announced in July, will mark a “major step” forward for Conti’s industrial unit ContiTech as it will diversify the company’s products, markets and industries, according to Andreas Gerstenberger, head of Continental’s industrial fluid solution business.
The move will also strengthen Continental’s materials expertise beyond rubber and deepen its specialist knowledge about the design, processing and handling of thermoplastics for industrial hose solutions.
“Thermoplastic know-how is essential in our transformation from a pure product supplier to a holistic supplier of systems and solutions in the field of industrial hoses,” Gerstenberger added.
With its combined product portfolio of rubber and thermoplastic hoses, Continental is now able to offer a range of flexible hoses for agriculture, the construction, transportation and food industries and other growth sectors in the future.
Founded in 1952 in Varese, Italy, Merlett operates three state-of-the-art production facilities in Italy and Switzerland in addition to “an extensive network of sales offices” in 12 European countries.
It's been about three years since ContiTech formulated the strategy to look for solutions outside rubber. As the group aims to reach $10 billion in sales over the near term — it clocked in at $7.48 billion in 2018 — Gerstenberger said all areas of the business looked to grow aggressively from within, but also would be open for partnerships and acquisitions to accelerate the growth even further.
That meant having a structured process to look at potential partners in all regions of the world, and Merlett was identified as one of the leading European firms in the thermoplastic hose world.
"They came onto our radar, we looked at the company, we contacted it and agreed together that our future as a team probably looks better together than separated," Gerstenberger said in August, in an interview with Rubber & Plastics News, a US sister publication of Plastics News Europe.
He added that Merlett is a family owned group, much like Custom Crimp, a crimper manufacturer out of Valparaiso that joined ContiTech's Industrial Fluid Systems unit in November 2017. Conti and Custom Crimp worked together to develop a cloud-based crimper controller for use in the hydraulic and industrial hose markets.
And just as its earlier acquisition of Veyance Technologies—the former Goodyear Engineered Products business—brought ContiTech much more exposure to North America, Merlett gives the business' thermoplastic business a boost in Europe.
"That's our target in acquiring companies like Merlett," Gerstenberger said. "To not only add something but to integrate and make it better and grow in the future. That's basically been a Conti strategy for many years."
Merlett also will help with Conti's overall effort to add more industrial-based business to better balance the automotive side of the company, he added.
From Merlett's perspective, the purchase will bode well for its future, according to General Director Marco Tamborini.
"With our wide range of flexible hoses, a well diversified customer base and a highly motivated team, we are able to contribute value-added," he said in a statement. "This is a good foundation for a successful joint future.
"We have grown as a family business for the past six decades and now we are very proud to hand over to Continental to continue to advance the business and provide a new home for our employees."
ContiTech's Industrial Fluid Division made a big move boosting its plastics presence in North America with a major expansion of polyvinyl chloride hose capacity at its Mount Pleasant, Iowa, facility. Gerstenberger said that project and the Merlett acquisition will provide potential for future joint efforts.
"This material change and development we have seen for quite awhile already, and while we don't think that rubber is going away, we think there will be certain substitutions and additions with thermoplastics," he said. "If you combine that with machine knowledge plus cloud-based, you are starting to work more and more on solutions instead of products only."
And while Merlett currently is European-centric with its revenues, Gerstenberger said "we want to use our strong North American customer base we have today in the future to further develop this business."
Likewise, he sees the opportunity to take a similar approach in providing solutions from Mount Pleasant through Merlett's sales base.
"As soon as the closing is done we can also start to exchange with Merlett recipes, procedures and processes, and believe me Mount Pleasant will be one of the first stops on that journey," he said. "We will strengthen with this acquisition clearly the North American offerings to our customers in terms of thermoplastics. It won't happen tomorrow morning, but it is part of the plan."
The Industrial Fluid Solutions business unit operates more than 25 production sites worldwide. It serves such industries as mining, oil and gas production, the food industry, water management, the chemical and pharmaceutical industry, and mechanical engineering.