Mergers & acquisitions in 2008

Dow Chemical (Midland, MI) moved to acquire Rohm and Haas (Philadelphia) in July, accelerating its shift into the specialty market. The deal called for Dow to pay $78/share, representing a 47.9% premium on Rohm and Haas’s 60-day average share price, and Dow was supposed to finance the deal with $3 billion in equity from Warren Buffet’s Berkshire Hathaway and $1 billion from its partner, the Kuwait Investment Authority, with which it was to form a joint venture for its basic materials business. On Dec. 28, however, the Kuwaiti government backed out of the proposed K-Dow Petrochemicals business, calling into question whether the Rohm and Haas agreement could go forward.

Had it gone forward, the $11 billion JV would have been led by James R. Fitterling, and maintained headquarters in Michigan. The company was to manufacture and market polyethylene (PE), ethyleneamines, ethanolamines, polypropylene (PP), and polycarbonate as well as related licensing and catalyst technologies.

The parties had already reconfigured the deal due to the deteriorating global economy, shifting the total enterprise value for the transaction to approximately $17.4 billion, representing a multiple of 7.1 on the 2006 EBITDA for the businesses that will create K-Dow, down from the 7.75 multiple discussed in December 2007.

Ending a saga that goes back to the summer of 2007, when Hexion Specialty Chemicals outbid the former Basell for certain Huntsman (The Woodlands, TX) businesses, a resolution was reached in the legal battle between the Texas based chemical and plastics business and the private equity firm Apollo Management LP. Hexion agreed to pay Huntsman $1 billion to terminate the proposed merger proposal with investment banks Credit Suisse and Deutsche Bank, which had originally signed on to back Apollo’s highly leveraged acquisition, covering the $325 million break-up fee.

Thermoforming machinery manufacturer Brown Machine (Beaverton, MI) gained a new owner in 2008, purchased by Spell Capital (Minneapolis, MN). The company acquired a majority interest in Pacific Production Technologies (PPT; Mt. Carmel, IL), which controls Brown and sister firm Epco Machinery (Fremont, OH). Spell bought its stake from Madison Capital Partners (Chicago, IL), which last January merged Brown and Epco into Pacific Press Technologies.

HTI High Tech Industries AG (St. Marien, Austria) acquired plastic pipes, profiles, and sheet extrusion equipment supplier Theysohn Group (Korneuburg, Austria) from its co-managing directors Rudolf Zahradnik and Siegfried Topf. In 2007 Theysohn had revenue of approximately €56 million. HTI was among the firms believed to have shown interest in purchasing fellow Austrian firm Battenfeld Injection Molding.

Additive producer Techmer PM (Clinton, TN) gained the Accel Color brand name, as well as facilities in Avon, OH; Naperville, IL; Ontario, CA; and Knoxville, TN, by acquiring Accel Corp. in the spring of 2008. The move expanded manufacturing, and added an established colorant brand. Techmer PM had already formed a joint venture with Germany’s Lehmann & Voss & Co. (Hamburg) called Techmer Lehvoss Compounds LLC, or TLC.

In April, CAD supplier Autodesk (San Rafael, CA) announced the acquisition of mold-filling simulation provider Moldflow (Framingham, MA) for $22/share in a deal valued at $297 million. Autodesk said it viewed the Moldflow platform as a means to augment its Digital Prototyping line, while Moldflow said in a release that the combined analysis and simulation programs would support part design, tool design, and part production. Paul Davis, director of industry and product public relations for Autodesk, told MPW that the addition was considered fully complementary without any redundant technologies.

In June, Citadel Plastics Holdings Inc. (Citadel) announced that it had acquired Bulk Molding Compounds Inc. (BMCI; West Chicago, IL), the largest supplier of custom formulated bulk molding compounds. Citadel is a portfolio company of Chicago-based private equity investment firm Wind Point Partners. According to a release on the acquisition, Citadel said it would build a global plastics compounding company with broad product and technology capabilities. BMCI joined the first company in the Citadel portfolio, thermoplastics compounder The Matrixx Group (Evansville, IN; www.matrixxgoup.com).

In May, auxiliary supplier Conair (Franklin, PA) and size-reduction specialist Rapid Granulator (Bredaryd, Sweden) announced they would mirror the organizational model applied in their new Chinese production plants, with the sister firms consolidating North American and European manufacturing efforts. Chris Keller, president of the companies’ parent firm, International Plastics Equipment Group (IPEG; Cranberry Township, PA), described the decision in a conference call as a continuation of what began last year in China and “the next move in IPEG’s corporate strategy.”

In the short term, the decision meant that Rapid would wind down its presence in Rockford, IL, offering some but not all of the 30 staff there the opportunity to move to Cranberry Township, PA, which will transition from only production of Conair equipment to an IPEG manufacturing site, assembling and manufacturing Conair, Rapid, and also Moditec low-speed size-reduction products. In Europe, Rapid’s Bredaryd, Sweden site would also become an IPEG facility, adding a Conair presence, although it would not initially include the manufacturing and assembly of Conair products there.

Italy’s injection molding machinery industry underwent a number of significant changes last Spring, including the news that March HT Italy (Cazzago), an independent company that serviced, sold, and modified machines imported for the Italian market by Chinese machine maker Haitian, had acquired the assets of defunct competitor Mir (Brescia, Italy) for €9.6 million and announced it will make and market its own line of machines. Haitian Europe (also Cazzago), the parent firm’s European subsidiary, announced it would take over sales in Italy from HT Italy effective June 30, 2008. Those moves came not long after Industrias Romi (Santa Bárbara D’Oeste), Brazil’s leading manufacturer of machine tools, injection molding machines, and blowmolding machinery, announced it would acquire Sandretto, the bankrupt Italian injection machine manufacturer. Sandretto has two factories near Turin, Italy, and about 295 employees.

In September, BASF (Ludwigshafen, Germany) announced plans to acquire additives and chemicals supplier Ciba Holding AG (Ciba; Basel, Switzerland), with Ciba’s board approving the takeover at the time. BASF was to make a public takeover offer of CHF 50.00/share to Ciba’s shareholders, a 32% premium to the share price before the bid. With liabilities and other obligations, BASF’s investment will approach about €3.8 billion. BASF expected to finalize the transaction in the first quarter of 2009 at the latest.

In October, Italian auxiliary supplier The Piovan Group acquired drying, blending, and material handling equipment supplier Universal Dynamics Inc. (Una-Dyn; Woodbridge, VA) from industrial-filter manufacturer MANN+HUMMEL (Ludwigsburg, Germany). That acquisition brought Piovan to four global production sites in Italy, Brazil, China, and the U.S.; 750 employees; and a sales volume of euro €125 million expected for 2008. Una-Dyn has 130 employees and annual revenue of $30 million. Founded in 1957 in Rosslyn, VA, as a maker of air-drying equipment, Una-Dyn was purchased in 1995 by MANN + HUMMEL for approximately $12 million.

Italian compounder SO.F.TER. SpA (Forli, Italy) acquired Matrixx Europe Srl (Mantua, Italy), the European subsidiary of American compounder Matrixx Group Inc., in October. Matrix Europe, which compounds polyamide 6 and 66, polybutylene terephthalate, and polypropylene, has installed capacity of 15,000 tons/yr, 30 employees, and projected 2008 revenue of €20 million at sites in Marcaria and Castelgoffredo. Founded in 1980, SO.F.TER. SpA compounds thermoplastic elastomers, including TPV, TPE-S, and TPO, as well as engineering thermoplastics (PP, PA 6/66, ABS, PC, HIPS, SAN, PC/ABS, and PPO). The company has 200 staff and forecast sales for 2008 of about euro 100 million.

Baird Capital Partners (Milwaukee) sold plasticizing systems manufacturer Xaloy (New Castle, PA) to Industrial Growth Partners (IGP), a San Francisco-based private investment firm, for an undisclosed price. Effective Nov. 10, Walter Cox stepped down as Xaloy’s president and CEO, and was succeeded by Ron Auletta, who came to Xaloy after a stint as president and CEO of GED Integrated Solutions Inc., a supplier of automated equipment/software for manufacturing windows, doors, and photovoltaic panels. He remains an advisor to GED’s board of directors.

 

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