NEWMARKET, Ontario—With the purchase of the remaining 45 percent of AirBoss Defense Group in its rearview mirror, AirBoss of America Corp. is moving forward with growth plans for ADG that could include more mergers or acquisitions.
It acquired the 45 percent minority interest in ADG held by Critical Solutions Holdings L.L.C. on Oct. 26, shelling out around $70 million. The deal includes 3.5 million shares of AirBoss—with an approximate value of $50 million—and $20 million in cash, according to Chris Bitsakakis, president and chief operating officer of AirBoss. The transaction will give CSH a 13 percent stake in AirBoss.
ADG was formed on Jan. 1, 2020, through the merger of AirBoss' defense division, industrial rubber solutions business and other operations in Acton Vale, Quebec, with Critical Solutions International Inc., a global supplier of route clearance and countermine offerings and survivability products to the U.S. and foreign military forces.
Throughout 2020, despite the COVID-19 pandemic, ADG consistently has gained new business and has posted new sales highs. "We see a tremendous amount of growth in the future," Bitsakakis said. "This pandemic has had a terrible impact on people and economies."
However, he admitted, it has allowed ADG to showcase its strength in the chemical and biological products sector. "For years we've been making plans to expand our military products more aggressively into health care markets. This pandemic has given us the opportunity to do so quickly and provide a product that truly saves lives."
Shortly after the pandemic struck in early 2020, AirBoss responded swiftly to an urgent call from the U.S. Federal Emergency Management Agency for a large order of the firm's FlexAir Powered Air Purifying Respirator systems, he noted.
In the first half of the year, the company's revenues for defense products quadrupled, operating income from ADG grew fivefold and it generated about $20 million in profit, principally driven by the major contract for respirator systems from the U.S. agency.
During the third quarter, the defense group received another major contract from the U.S. Department for Health and Human Services, totaling up to $121 million. That was followed by other governmental and non-governmental orders for personal protection equipment worth about $22 million.
On Nov. 10, AirBoss announced that its third quarter financial results hit another record level. Sales for the period more than doubled, growing by almost 111 percent to more than $162.7 million compared to about $77.2 last year. That brought sales for the first nine months to $369.4 million, up 52.4 percent from $242.4 million in 2019.
Net income for the quarter jumped to about $21.2 million from $1.5 million last year. For the first nine months of 2020, net income rose to $36.3 million from $7.8 million last year.
ADG posted a new sales high of $108.4 million, a 546 percent jump from revenues recorded in 2019's third quarter. For the first nine months, the defense business' sales rose 296 percent to $225.5 million.
ADG's gains offset softness in AirBoss' Rubber Solutions and Engineered Products segments, although the company has experienced sustained recoveries in both businesses during the third period that have approached levels of more than 85 percent of pre-pandemic volumes, according to Bitsakakis.
He said the prolific nature of the COVID-19 contracts may or may not recur, "but we continue to provide personal protection equipment for biological and chemical threats to both the military and health care markets during these challenging times. ADG continues to be positioned as an important driver of our overall business through the expanded survivability solutions product platform for both first responder and military applications."
With the acquisition completed, the company now has a work force of more than 1,200 at seven different plants in the U.S. and Canada, plus a joint venture in Malaysia.
AirBoss' defense plants produce and market gas masks, gloves, powered air purifying respirators, isopods, chemical decontamination shelters, Huskys and Blast Gauges Systems.
Its engineered products facilities manufacture noise, vibration and harshness products along with rubber and rubber-to-metal bonded parts for automotive and non-automotive markets. The firm's compounding factories produce all types of compounded rubber for customized applications.
AirBoss noted that the acquisition will not impact ADG's management or operations as it was already tightly integrated within the firm.
"Because we are having such a strong year, we are well ahead of our deleveraging plan," Bitsakakis said. "By buying out the minority partner from ADG we are putting ourselves in a better position to leverage our clean balance sheet in its entirety to assist in M&A opportunities going forward."
AirBoss CEO Gren Schoch said the acquisition of full ownership of ADG "will now provide us additional flexibility as it relates to future growth strategies for AirBoss, including potential mergers and acquisitions, and eliminate the minority interest in ADG's profits and cash flows which is anticipated to be well received by our shareholders and potential new investors."