Freudenberg cites three pronged approach with Seal Aftermarket Products acquisition

PLYMOUTH, Mich.—Freudenberg-NOK Sealing Technologies is expanding its Corteco and TransTec-brand offerings with its latest corporate acquisition.

The company purchased Florida-based aftermarket solution company Seal Aftermarket Products (SAP) L.L.C. on Nov. 6, in a deal to further bolster its presence in North America.

Financial terms of the deal were not disclosed.

On a surface level, the deal adds to the Freudenberg Sealing product portfolio, but it offers so much more under the hood. Christian Dickopf, senior vice president of the Freudenberg Sealing Technologies Corteco division, said that the company had a trio of reasons for getting this deal done.

"Portfolio addition, in my mind, is (the chief reason)," Dickopf told Rubber News. "It helps us on one hand to add something to our portfolio that brings us a broader offering regarding seals and seal kits. Addition number two, Seal Aftermarket Products sells parts that we haven't sold yet. You can think about friction plates for example, or electronics, that are no doubt interesting in the transmission market, but we didn't have them in the past. … And then, there's the third addition, which is geographically."

The move further solidifies Weinheim, Germany-based Freudenberg's share of the North American market, especially within its aftermarket and testing divisions in Plymouth, Mich. Dickopf said that the market is extremely appealing, and Freudenberg is consistently looking to strengthen its presence in any way it can.

First and foremost, the acquisition is about giving customers, especially those across North America, a choice of brands. Dickopf is "absolutely convinced" in the promise of the North American market demand for these products and said the company looks forward to being able to supply that demand.

Dickopf said that Corteco and TransTec, and Toledo Trans-Kit are viewed almost as two different tiers of aftermarket brands. Putting both brands under the Freudenberg umbrella allows the company to reach customers who may be more price conscious.

"TransTec is positioned as a premium brand," Dickopf said. "It is a premium product, that comes at a premium price. And we're very successful with that, but we're also aware that there is a customer group out there that's not looking for a premium product at a premium price.

"That's where Seal Aftermarket Products comes into play."

Dickopf said that the move will grow Freudenberg's business footprint around the world. The company is focused on North America for this acquisition, as Corteco, TransTec and Toledo Trans-Kit already are positioned there, but the transaction will have aftereffects in other regions.

"This purchase broadens our portfolio and enhances our global footprint in the transmission repair market," Dickopf said. "Business investments like this one will help us better reach new and existing customers with a complete line of specialty aftermarket vehicle solutions."

In addition to strengthening the company's presence in North America, the deal will "change Corteco's competitive landscape" in other regions where branding is not quite as strong, the company said.

It might seem obvious, but having a stronger portfolio opens Freudenberg products up to a wider customer base. In addition to those seeking a more wallet friendly alternative to the Corteco and TransTec products, the acquisition introduces the company to new markets in a geographical sense.

"Seal Aftermarket Products also has business outside of North America, in countries where we were not present," Dickopf said. "It opens up geographical room for us, and opportunities. … Having a broader portfolio gives the customer more choice on what to buy from us."

Common SAP brands such as Toledo Trans-Kit will remain intact in the deal, Freudenberg officials said. The acquisition of SAP brings the two aftermarket brands under one roof and makes both stronger than ever, even with the difference in price.

"While the TransTec brand is currently focused on aftermarket sealing products such as gaskets, radial shaft seals, specialty sealing components, the TTK brand will add a focus on hard steel components," the company said. "Such as clutches, drum assemblies, and other transmission specialty steel components like valve assemblies that may need replacement in a transmission."

The transaction strengthens Freudenberg's position in a North American market that has relatively few large corporate suppliers. Even a seemingly small move could have an outsized impact on the overall market, and Freudenberg's acquisition could be that move.

"When you look at the North American transmission market, the supplier side is not terribly big," Dickopf said. "There are three main players, or three main brands, if you will. Through that acquisition, our share of that market grows significantly bigger, which obviously strengthens our position."

The Freudenberg and SAP brands "complement each other," according to company officials. As the Corteco and TransTec brands continue to grow in North America, the acquisition of SAP hopefully will present further opportunities across the market, especially in regions that heavily rely on older vehicles.

"We see this as a substantial market and that is why we are investing in it," Dickopf said of regions with aging cars. "While there will be a lot of technology transition at the OEM level in the foreseeable future, this is a commitment to the afterlife that internal combustion engine technologies will have for a substantial period of time."