TWINSBURG, Ohio—Lexington Precision Corp. has bought Quality Synthetic Rubber Inc. in a deal that will form a $160 million company focused mainly on making rubber products for the automotive and medical industries.
Terms of the transaction, which closed July 6, weren't disclosed. The acquisition involves private equity firms on both sides of the equation.
Lexington Precision was supported in the purchase of Twinsburg-based QSR with additional funding from its owner, Industrial Growth Partners, along with management and other investors. QSR itself had been owned for five years by Cleveland-based Blue Point Capital Partners L.L.C.
QSR's primary product line includes precision-molded silicone seals used in automotive and industrial electrical connector assemblies and high-precision silicone medical components such as vessel loops, IV components, catheters, and surgical and sterilization models.
It has manufacturing for its QSR and Medical Elastomer Development Inc.—Med Inc.—at its Twinsburg facility and additional automotive production at a factory in Dong Guang, China. QSR also has a medical goods molding facility in Sturtevant, Wis., acquired when it bought the Limtech silicone molded products business in November 2011.
Lexington also makes molded goods for the medical and automotive sector. At its Jasper, Ga., facility it manufactures primarily silicone insulators for ignition systems. The unit also has the company's major material compounding and mixing operation.
It makes its medical goods at a plant in Rock Hill, S.C., using a variety of elastomers including polyisoprene, silicone, EPDM, natural rubber and nitrile rubber. Lexington is headquartered in North Canton, Ohio, which also houses its engineering center to design and build tooling and automation controls.
Both companies had annual sales of roughly $80 million, with automotive accounting for about $110 million and medical $50 million, according to Ray Grupinski, the Lexington CEO who will oversee the combined business.
He said the new entity represents one of the largest all-rubber product firms focused primarily on custom manufacturing. Lexington does have about $27 million in automotive aftermarket sales.
Employment is about 975 and expected to grow along with business, officials said.
“We will be a single one-stop shop for our customers' elastomer spend,” Grupinski said. “We want to make sure we fully service our customers in the best way possible.”
Background of the deal
Lexington emerged from Chapter 11 bankruptcy reorganization in July 2010 when it was purchased by private equity firm Aurora Capital Group. Aurora sold it in August 2011 to San Francisco-based IGP, which brought on Grupinski as CEO. IGP invests exclusively in middle-market manufacturing businesses in partnership with management.
Grupinski said Blue Point put QSR on the market after owning it for five years, and Lexington officials made its first visit in February.
“IGP looks at a number of companies every year and we saw it as a very good fit for our organization,” he said. “The QSR business comes with a phenomenal management team. We kept the entire management team in this whole process because it dovetailed together so nice.”
The two companies also had bumped into each other often in the marketplace, officials said. While QSR is a dominant player in connector seals, Lexington has a small share in that market, with its main focus on insulator components.
They also crossed paths in medical. QSR, through Med Inc., brings liquid injection molding production that Lexington didn't offer.
“We didn't just go out and buy customers and not add a capability,” said Mike Torti, Lexington vice president of sales and marketing. “What we did was go out and acquire a firm that gives us the full range of services that we can bring to the marketplace.”
Blue Point said under its ownership QSR's sales and earnings increased by more than 50 percent and China revenues rose five-fold. It also said it diversified QSR beyond just the U.S. automotive market through expansion in medical and setting up manufacturing in China.
“We are extremely pleased with what we've been able to accomplish alongside the management team at QSR, driving significant growth and diversification, while navigating an unprecedented downturn in 2009,” said John LeMay, a partner with Blue Point.
QSR CEO Randy Ross said “Blue Point was a true partner and provided very impactful operational and strategic support to the business.”
Lexington and its new acquisition will be split into two operating businesses, automotive and medical, Grupinski said.
Ross will serve as president of the automotive group and remain based in Twinsburg. “He's phenomenal and jumped right in and helped me out,” Grupinski said. “I think as a team we're going to do very well together.”
Gregg Lambert will be responsible for medical operations in Rock Hill, along with the Med and Limtech production, with Torti overseeing medical sales.
Grupinski said the integration will happen quickly. Over the next 90 days, the team will lay out tactical plans and turn that into a blueprint to put the businesses together. “Because we kept all the management team, it's going to be a very smooth process,” he said.
All facilities will stay in place and decisions on which products will be made where will depend on customer needs.
Torti said plans are under way to recruit new talent such as process engineers and other high-tech positions.
Also on the agenda will be to add medical component manufacturing to the China factory over the next year. “Our plan is to start manufacturing as soon as possible there for our medical device customers so we can service them on a global basis,” Grupinski said.
Though he has had limited time to meet with the employees, he said feedback has been supportive from the management staff to operators on the shop floor.
“It's not like we don't know each other in the marketplace,” Grupinski said. “I think we're very familiar with the companies and who we are and our capabilities. Both teams realize coming together that it's going to be a phenomenal fit.”