ELKHART, Indiana - US supplier Excel Industries Inc. is poised to make an acquisition that could turn the company into a key player in Europe.
Elkhart-based Excel signed a nonbinding letter of agreement on 27 January to purchase a 70 percent share of German injection molder Schade GmbH & Co. KG. The acquisition - potentially the largest ever for Excel - includes Schade's seven European plants that together achieved 1997 sales of about $275 million.
The potential deal would make Excel a leading supplier of encapsulated window systems on that continent. Encapsulation involves molding a rectangular, one-piece plastic part around a sheet of glass to frame a car or truck window.
If financial conditions can be met, the sale will be completed in early March, with a 1 July closing date, said Excel spokesman William Schall. The purchase will be funded from operating cash and standby credit lines, Schall said.
Excel did not disclose possible sales terms. An industry analyst estimated the price at $75 million to $80 million, with about $30 million of that from cash and the rest in debt assumption.
'Right now, [Excel] is considered a large supplier in North America but not elsewhere,' said equity analyst Eric Goldstein of New York-based Bear, Stearns & Co. 'This looks like a very good deal to put the company on a world stage. Ford is their largest customer, and they are the most aggressive among the Big 3 in going to a global platform.'
Excel and Schade, based in Plettenberg, Germany, are not strangers. Under a strategic alliance, the suppliers have shared products and technology since 1988, said Louis Csokasy, president of Excel's automotive business.
Excel has provided Schade with reaction injection molding technology to make polyurethane encapsulation systems, Csokasy said. Schade brought technology for rolled-metal upper door frames to Excel.
Excel and Schade make encapsulated windows, which also can be injection molded using polyvinyl chloride PVC and metal door frames. They have worked together on customer presentations for door modules, Csokasy said. Door modules are beginning to gain notice with automakers.
The acquisition was the next logical step between two companies that share similar interests and activities, Csokasy said.
Schade, which has about 2,600 employees, operates three plants in Germany, two in the Cologne area, and has single factories in the UK, Czech Republic, Portugal and Spain.
Schade's largest customers are Volkswagen, Audi, BMW, Ford and Opel, said Wolfgang Krappe, manager of technical operations.
Schade operates injection presses ranging from 400-1,600 tonnes of clamping force, but would not disclose how many it has.
Hella KG Hueck & Co., a lighting and electronics supplier based in Lippstadt, Germany, owns 30 percent of Schade. Excel is attempting to purchase the remaining 70 percent share now owned by private stockholders.
Schade realized that to stay competitive, it needed a US partner, Krappe said. 'We know that for the long term, we have no future only in Europe,' he said.
Excel has no European plants. The company supplies about 47 percent of its parts to Ford, where it is a preferred supplier for window systems. About 65 percent of total company sales come from Ford, GM and Chrysler, according to a 1996 annual report.