Magnifoam Technology International Inc. has obtained bankruptcy court approval to buy RBX Corp.'s Groendyk silicone product business and plans to finalize the transaction Aug. 27.
The $3.84 million deal-approved Aug. 16 by the U.S. Bankruptcy Court in Roanoke-will allow the Mississauga, Ontario-based company to take control of the Groendyk operation, including a 77,000-sq.-ft. plant in Buchanan, Va. MTI and RBX reached a definitive agreement on the purchase in July.
MTI will own and operate the Groendyk business via its newly formed subsidiary, MTI Groendyk Inc. ``We're pleased that the deal has been finalized and we'll close the 27th,'' said Bill Neill, MTI president and CEO.
The Buchanan site, RBX's last active manufacturing facility, is the sixth company plant to be sold in 2004. The Roanoke-based foam rubber and silicone maker filed for Chapter 11 bankruptcy protection on Feb. 24, the second time it did so in the past three years. But unlike its 2000 bankruptcy filing, this time the company decided to liquidate its holdings.
The Groendyk operation manufactures a variety of specialty silicone products and will complement MTI's offerings, Neill said. ``Their technology will add an extra dimension to our own silicone knowledge and solution expertise,'' he said. ``Groendyk has a unique silicone sponge extrusion process that will offer MTI a competitive advantage in both the U.S. and Europe.''
MTI's two main goals with Groendyk are to expand the product lines there and find new outlets for its own lines, Neill said. He expects few initial changes-perhaps some lean manufacturing initiatives-and said the factory will run on its own merit.
``They've done a good job there,'' he said. ``Even with RBX's financial problems, it was a profitable plant. It was an attractive purchase for us.''
According to financial data from John Boots, MTI senior vice president and chief financial officer, the Groendyk business brings annual sales of more than $10 million to the company. He expects MTI Groendyk to contribute earnings before income taxes of about $760,000 in fiscal 2005.
About $2.9 million of the final price of the business-which will rise to about $4 million including transaction and integration costs-is working capital represented by receivables and inventory, he added.
One of the big factors in getting the Groendyk deal done was the agreement reached with the United Steelworkers of America, which represents about 60 of the Buchanan site's 70 employees. Gregg Strangways, MTI vice president, North American Silicones, said the collective bargaining agreement in place required that it be carried over with any sale of the facility, and RBX had concerns about being sued for breach of contract if it didn't honor the agreement.
But MTI and the USWA proactively worked out a new three-year contract, and the USWA wrote a letter to RBX saying if MTI purchased the Buchanan facility, it would relinquish any contractual liability upon RBX, Strangways said. ``The union was extremely business-oriented and stepped up to the plate,'' he said. ``Otherwise, the sale might not have happened.''
MTI also operates a plant in Richmond, Va., and the company plans to seek sales and efficiency synergies between the two Virginia facilities, Strangways said. But the firm intends to maintain the Buchanan factory and the work force there on a going-forward basis, he said.
The Canadian firm makes custom-engineered products using silicone and other cellular materials, and operates three main businesses: Silicone, Aerospace and Fabricated Products. It supplies primarily the aerospace and mass transit markets, but also makes products for the sporting goods, automotive, industrial, medical and electronics sectors.
In addition to the U.S. sites, MTI also operates manufacturing facilities in Mississauga and Bremen, Germany.