Acquisitions Abound in the Finishing Industry

Columns From: Products Finishing, , from Products Finishing magazine

Posted on: 11/1/2012

End-markets are growing, raw material costs are declining, and more than the usual number of mergers and acquisitions took place, possibly signaling a resurgence of the U.S. coating industry. The Carlyle Group won a bidding war to take over DuPont Performance Coatings; Innotek Powder Coatings was purchased by Protech/Oxyplast; United Capital Funding Corp. purchased Architectural Finish Systems; and Pioneer Metal Finishing of Green Bay, Wis., bought Superior Metal Finishing of Portland, Ore., to go along with plants in Wisconsin, Oregon, Michigan, Minnesota, South Carolina and Indiana.

Picture fictional tycoon Gordon Gekko from the movie “Wall Street” in a protective jumpsuit, not a hair out of place, powder coating parts that pass by his booth.
 
Or visualize Donald Trump working the plate bath—a gold plating line, no less—while two of his bratty kids rack parts for the next batch.
 
Or maybe even billionaire Warren Buffet, astutely electrocoating parts for one of the zillion companies he owns.
 
That’s kind of what it has felt like in the finishing world over the past month, as what seemed like more than the usual number of mergers and acquisitions took place, possibly signaling not a decline in the future of the U.S. coating industry, but a resurgence.
 
First, we had The Carlyle Group winning a multi-billion dollar bidding war to take over DuPont Performance Coatings, which includes DuPont’s powder coating division as well as paints for the automobile and collision industry.
 
These Carlyle guys are not dumb folks—not when they have more than $160 billion in assets under management. Their motto—“To invest wisely and create value”—tells us they believe there is value in the DuPont business, even in the powder coating sector.
 
“The powder business is good,” says Matt Robertson, North America sales sirector for DuPont Performance Coatings. As for paint, he says, “We’re seeing some growth in OEM, and we’re having a pretty good run with heavy-duty trucks right now.”
 
DuPont was not the only big deal made in powder. Innotek Powder Coatings of Big Spring, Texas, which specializes in high performance thermoplastic powder coatings, was purchased by a Canadian company, Protech/Oxyplast Group, which has been on a buying spree of late.
 
Protech/Oxyplast took over the North American powder coating business and assets of Govesan Manufacturing of York, Pa., back in 2009, the year after buying Enviro-Powder of Grand Rapids, Mich., and Atomized Powder Coatings of Terre Haute, Ind.
 
Another investment group, United Capital Funding Corp. of St. Petersburg, Fla., purchased Architectural Finish Systems, which boasts that it has one of the largest batch ovens in the U.S. at 60 ft; the capacity to coat parts and medium as long as 64 ft; and a 1,000-ft-long automated line that includes a six-stage wash, dry-off and gel station. United Capital also quickly announced an additional investment in AFS to expand the facility and purchase additional equipment.
 
“We are very excited about the new ownership and the significant investments they have already made to help us expand,” says Jamie Hickey, AFS general manager. “They are committed to the long-term goal of ensuring that we remain the one of the leading powder coating operations in the southeastern U.S.”
 
On the plating side, Pioneer Metal Finishing of Green Bay, Wis., bought Superior Metal Finishing of Portland, Ore., to go along with the plants the company already operates in Wisconsin, Oregon, Michigan, Minnesota, South Carolina and Indiana.
 
Superior has served the electronics, medical and aerospace industries since 1980, and specializes in plating of gold, electroless nickel and tin. Bob Pyle, Pioneer’s president and CEO, says he needed a second Oregon operation to service the growing Northwest regions, especially in the electronics, medical and aerospace industries.
 
So why are private investment groups and others writing million-dollar-and-more checks for finishing businesses? Because it’s a smart move.
 
According to the website SeekingAlpha.com, “The paints and coatings industry has significantly blossomed this year, primarily as a result of the shale gas boom.”
 
The site, which was named the most informative website by Kiplinger's Magazine and has received Forbes’ Best of the Web award, also says that costs are finally going down for some coaters, and end-markets are starting to take off again, signaling growth in the finishing sector.
 
“The recent downward trend in raw material prices is a healthy signal for this industry, which was previously facing pressure from high costs,” the website says, pointing to these factors:
 
Aerospace coatings: They derive their demand from the two chief jet producers, Airbus and Boeing, and, although Airbus’ deliveries have dropped in recent months, the overall trend is encouraging enough to warrant a sustained demand from this segment.
 
Propylene: One of the key raw materials in the paints and coating industry, companies like Sherwin-Williams and PPG Industries have seen that prices have been a flat, with polymer-grade propylene settling at 78 cents per pound.
 
Titanium Dioxide: TiO2 is a major raw material, especially in the powder coating industry, and its prices are also going downward as a result of improved supply conditions.
 
So if you have a few bucks and are looking to spend on a new business, now might be the time to do it. Just don’t get into a bidding war with Gordon, Donald and Warren.

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