Niigon, in bankruptcy, evicts Amsler from leased facility

Niigon Machines Ltd.'s liquidation has created an issue for another Canadian plastics machinery company.

Amsler Equipment Inc. has been locked out of its new location in Vaughn, Ontario, for nonpayment of rent to the recently bankrupted Niigon.

But it shouldn't be for long.

Amsler's owner Stans, Switzerland-based Benpac Holding AG, has negotiated use of the site with Niigon's bankruptcy trustee, according to Benpac founder Marco Corvi.

"We have initiated the transfer of the rent claim," Corvi said in a Nov. 10 email. "This will be received by the bankruptcy trustee in the coming days. This will allow us to safely return to the premises immediately."

In the meantime, Niigon assets are being sold off. The company, which was founded by industrialist Robert Schad, declared bankruptcy Sept. 24 with debts totaling C$108 million (US$87.3 million). About 60 employees lost their jobs.

The relationship between Amsler and Niigon is complicated, but both are connected to Corvi's plan to make Benpac into a network of businesses covering the gamut of PET bottle production.

Benpac first made a splash in plastics machinery nearly two years ago, when it purchased 26-year-old W. Amsler Equipment Inc., a Bolton, Ontario, blow molding equipment maker founded by Werner Amsler, a Swiss immigrant who had worked in plastics since 1970.

Amsler was looking to retire, and he found a buyer for his company in Benpac Holding, a company following a one-stop-shop strategy to bring together leading packaging supply chain companies.

When Benpac purchased Amsler Equipment in January 2020, the company already had some related packaging holdings in Europe, Asia and North America. When Amsler officials disclosed the deal with Benpac 11 months later, they hinted that additional acquisitions were on the horizon.

That was because a potential deal with Niigon was already in the works.

The Schad family first approached Benpac through Scotia Bank, Corvi said. Benpac had on-and-off talks to buy Niigon assets in fall 2020 and spring 2021, he added.

Benpac was interested in acquiring Niigon's buildings and intellectual property, Corvi said.

On June 10, it appeared that a deal with Niigon was close when Benpac announced it had moved Amsler to the Niigon facility in Vaughn because its previous site in Bolton was "too small" to meet the demands of a "future-oriented corporate strategy."

A Benpac news release at the time described the 40,000-square-foot Niigon building as one of Canada's most environmentally friendly facilities with solar panels on the roof generating electricity and a geothermal system to provide heating and cooling.

At the Niigon site, the release continued, Amsler would provide its customers with spare parts, service, bottle development and trial runs of bottles, engineering support, machine retrofits, leak testers and spin trimmers, and tests of Amsler machines built in Switzerland.

Corvi says now that he was negotiating a deal to buy certain assets of Niigon, but that the closing was contingent on a site visit because he was concerned about "accumulating negative information" regarding high debts, unpaid bills and management problems at Niigon.

Corvi arranged travel from Switzerland to Canada on Sept. 7-8, 2021 — as soon as pandemic-related restrictions were lifted. He said he was shocked by what he saw.

"Niigon was in such bad shape that it was difficult for me to see a plan behind an asset deal," Corvi said. "Bad management, no orders, no plan for the future, disillusioned employees, and most importantly, high debt. In particular, sales, especially in the PET sector, were criminally neglected. There was also no advertising strategy. The important PET area in particular was very poorly managed."

The deal was in jeopardy.

Corvi said he had questions for Niigon management about the company's future, sales, business plan, finances and employee structure. He asked for a management meeting but said it was "surprisingly canceled the day before."

Questions then were submitted to Scotia Bank as the representative for Niigon and the Schad family. Corvi said he did not get a reply from the bank either.

"I have said in no uncertain terms that there would be no deal without answers," Corvi said.

When it became obvious that Benpac was not going to buy Niigon, the injection press maker filed for bankruptcy and moved to evict Amsler.

If a buyer steps up for the building where Amsler relocated, Corvi said he will try to enter into lease agreement with the new owner. He also is looking at alternative locations.

The problems at Niigon and Amsler are drawing attention to Benpac's mostly under-the-radar plan to create a holding company with a goal of offering everything related to PET bottle production, from tooling and machines for injection molding preforms to equipment for blow molding, filling and labeling.

Despite the challenges, Benpac officials aren't giving up.

"Benpac continues to pursue its strategy to grow in the packaging sector," Corvi said, pointing to PET and metal packaging as well as thin-wall packaging, paper-based packaging and blisters.

"The aim is to be able to offer the entire value chain, from raw material to palletized product," Corvi said. "To this end, Benpac will restructure the entire packaging business and manage it under one roof, in six divisions. This optimization will be implemented in the coming months. New companies or production centers will also be created for this purpose."

In the background, however, the talks between Niigon and Benpac faced snags on the heels of another problem deal.

In June 2020, German printing machinery company Heidelberger Druckmaschinen AG had announced plans to sell its Swiss label-printing unit, Gallus Holding AG, to Benpac for 120 million euros.

However, "Benpac Holding AG failed to make the agreed purchase price of 120 million euros by the Jan. 29 transaction closing date even though all preconditions had been satisfied," according to Heidelberg's annual report, which was released in June 2021.

Heidelberg exercised its right to withdraw from the deal. The company is claiming damages against Corvi and suing Benpac for 50 million euros.

In response to that lawsuit, Corvi reportedly told Christopher Gilb, a reporter at the Swiss newspaper Luzerner Zeitung: "During the final work on the purchase of the Gallus Group, Benpac Holding AG came across questionable facts in Gallus' distribution agreements. This prompted Benpac to refrain from buying Gallus. Heidelberg Druckmaschinen AG had already been threatened in writing in October 2020. Based on these facts, Benpac is calm about a lawsuit by Heidelberg Druckmaschinen AG."

Corvi told Plastics News that Benpac reserves the right to sue for fulfillment of the Gallup Group purchase.

"We will now see how the next few months develop. …There were reasons against the closing that had nothing to do with financial issues but with legal uncertainties," he said.

 

Like Werner Amsler, Robert Schad was a leading figure in plastics machinery, in Canada and globally.

Schad, 92, is an inductee into the Plastics Hall of Fame who also started Husky Injection Molding Systems in 1953 and Athena Automation Ltd. in 2008. Athena changed its name to Niigon in 2018.

In its early days, Niigon's future was bright as it focused on modular customizable presses with a five-year warranty and long-term relationships with suppliers, many that had strong bonds with Schad from his years at Husky.

However, Niigon encountered many hurdles, including a patent dispute, limited product line, lack of global sales and service staff, warranty issues and then the COVID-19 pandemic.

With debts mounting, in August 2020, Niigon officials retained Scotia Bank in Toronto to look globally for buyers. The search resulted in a May 2021 offer for certain parts of the business from Benpac.

Workers at Niigon were aware that Schad was planning a deal with Benpac and that it was taking longer than expected to be finalized.

Meanwhile, the newly relocated Amsler operation was slow to ramp up in Vaughn after the workforce was reduced from a couple dozen employees to a handful.

Over the next few months, the Benpac-Niigon deal fell apart, according to Paul Denton, a managing director of A. Farber & Partners Inc. in Toronto, which was appointed both receiver and trustee in the bankruptcy.

"Unfortunately after numerous extensions and accommodations over a four-month period, the prospective purchaser was unable to advance the funding to close the transaction," Denton said in an Oct. 15 virtual meeting for almost 200 unsecured creditors owed about C$105 million (US$84.8 million).

"Without the resources to continue to fund operations," Denton continued, "the company was left with no viable alternative but to file for bankruptcy."

Niigon's assets total about C$15 million (US$12.12 million), excluding patents, and Denton has said that is not enough to cover the secured credit owed to Schad.

"Both losses and working capital needs were funded by substantial shareholder loans, which through mid-2020 was about $105 million," Denton has told unsecured creditors.

An online auction of Niigon assets is scheduled for 9 a.m. Nov. 29, according to industrial liquidator Infinity Asset Solutions Inc.

Amsler lease terminated

On Oct. 27, an agent for Farber & Partners, S. Wilson & Co. Bailiffs Ltd., issued the legal notice that the Amsler lease with Niigon was terminated and the building door locks had been changed.

Amsler staff was given five days to contact the bailiff about removing goods and chattels.

The notice also says Niigon reserves its right to seek recovery of the rent arrears, loss of future rents and legal costs.

Corvi said Niigon billed Amsler about C$150,000 for use of the space about 10 days before it declared bankruptcy.

"This invoice was sent in an extremely aggressive manner," he added. "We assume that the claims had to be settled quickly so that in a planned bankruptcy this claim could be asserted. Possibly it was also pure disappointment that an asset deal has not come about. After that, the bankruptcy of Niigon Machines Ltd. happened very quickly."