CADILLAC, Mich. (May 22) — Avon Rubber P.L.C. has agreed to sell its automotive unit to the business´ management, backed by Red Diamond Capital, a private equity firm based in New York, for $115 million.
The deal, contingent on shareholder approval, is expected to be completed within three weeks, Avon said. Red Diamond and Avon management have set up Petrol Automotive Holdings Inc. to handle the acquisition.
Avon´s automotive unit generates annual sales of about $350 million from the sale of low-pressure hoses for air-induction, fuel and coolant systems, as well as vibration-management products.
"As a privately held company, we hope to accelerate Avon Automotive´s global investment in technology, creating value for our automotive customers as well as career opportunities for Avon employees around the world," said Lee Richards, who heads the buyout team and serves as president of Avon´s automotive division.
Richards noted that Red Diamond Capital has a strong commitment to the automotive industry, adding that he expected Avon Automotive´s fundamental business operations and product lines to continue unchanged after the buyout.
Richards said that Avon Automotive´s management team will remain in charge of the new enterprise and no plant closures are anticipated as a result of the transaction. Avon Automotive´s global headquarters will continue to be in Cadillac.
Avon Rubber cited the automotive unit´s relatively low operating margin — earnings/sales ratio of 4.2 percent for the six months ended March 31 — competitive environment and rising materials costs for its reasons to sell.
Avon Automotive has more than 3,500 employees at 12 plants in the U.S., England, Mexico, France, Spain, Portugal, Czech Republic, India and Turkey. The division serves the automotive, heavy truck, small engine, and recreational vehicle industries.