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Compounding plastics: Fitzpatrick outlines plans for plastics compounding market

June 27, 2008

2 Min Read

Compounding plastics: Fitzpatrick outlines plans for plastics compounding market

Citadel’s Mike Fitzpatrick(Update)—After reporting in last week’s e-Weekly on Citadel Plastics Holdings’ acquisition of bulk molding compounds supplier BMC Inc. (link), MPW caught up with Mike Fitzpatrick, CEO of the holding, while he was on business in Italy to ask his reasons for the acquisition as well as gain insight into his stated goal to become a global force in plastics compounding. MPW also asked what drove his interest in plastics compounding, a market segment noted for brutal price wars and one that has dragged down some major players in the past. Fitzpatrick cited a number of reasons for Citadel’s interest in BMCI, chief among them the respect the company has earned among its customers.BMCI also brings a global footprint, with established facilities in Mexico, the U.S., Europe, and recently a startup in China with local management, that will give Citadel’s other portfolio firm, thermoplastics compounder The Matrixx Group, easier access to these markets. Matrixx now has compounding facilities in the U.S. and Italy. “BMCI gives us a toehold into these markets, very quickly,” he said. Adding thermosets also enables him to approach customers not with a set program of ’We offer this,’ but rather, ’What do you need?’ “I wanted to be able to talk to customers about their needs,” he explained. Regarding potential additional acquisitions, Fitzpatrick noted that a compounder of thermoplastic elastomers might fit well into the portfolio from a technologyhttps://www.plasticstoday.com/materials standpoint. On the financial side, he reckons the “sweet spot” for the size of the holding company probably will fall between $400-500 million in annual revenue. Matrixx (about $125 million) and BMCI (about $130 million) get him a bit more than halfway there. “I could see myself doing several $50-60 million transactions (acquiring firms with that in annual sales) or maybe another big one,” such as the Matrixx and BMCI purchases, he said.“There is a way to be successful in this market,” he insists, mentioning that some transactions in the market in the past appeared more focused on size than strategic fit. One mistake he feels is made by too many plastics compounding businesses in the past years has been to overlook the value of a compounder’s brand equity. BMCI and The Matrixx Group have good names and customers, so he did not want to harm. “To use that brand equity I needed a structure that doesn’t negatively affect brand equity. That is the reason for the holding company,” which he says will allow the firms to continue operating independently but can also help realize some synergies for those parts of the businesses that do not have any direct contact with customers.”—[email protected]

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