Conti moving forward after Veyance acquisition

FAIRLAWN, Ohio—ContiTech A.G. wasted little time establishing its presence in North America following the completion of its acquisition of Veyance Technologies Inc.

Four days after Hanover, Germany-based Continental A.G., parent of ContiTech, received final regulatory approval to buy Veyance for $1.58 billion from the Carlyle Group—the largest ever acquisition of a non-tire rubber product company—ContiTech began making its first key moves.

Among them are:

• Selection of Veyance's complex in Fairlawn as ContiTech's North American headquarters, which now will include some merged ContiTech/Veyance units;

• Naming Charles Seymour, previously Veyance's vice president and general manager for North America, CEO of the firm's combined North American operation and the head of its conveyor belting business in the region;

• Folding the Veyance's name to ContiTech, although Veyance will be retained for some legal purposes; and

• Setting the stage to eliminate the use of Goodyear Engineered Products soon as the brand name for Veyance's products.

In addition, Veyance CEO John Hamilton has elected to resign and leave the business, said Heinz-Gerhard Wente, a member of Continental's executive board and CEO of ContiTech. Hamilton let ContiTech know of his decision early in the process, Wente said.

ContiTech and Continental finalized the purchase of Veyance on Jan. 29. The planned acquisition was announced last February but couldn't be closed until the company received antitrust and regulatory approval from several nations.

The approvals came with two major provisions: the U.S. and Mexico said ContiTech must divest the Veyance air springs operation in San Luis Potosi, Mexico, while Brazil ruled it had to sell Veyance's steel cord production business in Sao Paulo. Other nations granted approvals in 2014.

“For the entire transaction, it's not a big problem,” Wente said. “But if you see it in specific areas, for sure we would have wished there was another solution. But we have to accept it as it is and try to do now the very best for the business and for the people involved.”

Discussing the merged companies during a Feb. 3 news conference held at the Fairlawn facility, Wente and Seymour said the company is in the process of meeting with potential buyers for the two operations. “We would like to sell both as soon as possible,” Wente said.

ContiTech's latest and biggest acquisition has vaulted it to the top of the ladder in the North American belting and hose markets and bolstered its position as the world's top non-tire rubber products company.

The firms currently combine for roughly $6.3 billion in annual sales. The combined work force of the two companies was about 38,000 in 2013, according to ContiTech.

Of even greater significance to ContiTech is that Veyance has a very strong presence in the U.S. and North America. Combined, the firms employ about 7,500 in North America, with 4,500 from Veyance and 3,000 from ContiTech.

The Fairlawn office was chosen for the North American base, Wente said, because ContiTech previously had no headquarters on the continent because the business was so decentralized. “But with the size which comes to us in North America, it is best to have a common organization for all ContiTech activities here,” he said.

Veyance also has a solid foothold in Africa, Latin America, China and other Asian countries. About 90 percent of its revenues are generated in the industrial sector, a key point for Continental as it wants to reduce its dependence on automotive.

ContiTech is much stronger in Europe, Asia and other parts of the globe, Wente said. It did not have a strong presence in North America prior to the acquisition. He said Veyance will complement ContiTech in markets where it presently is not as strong and that more than 50 percent of its sales will now be outside of the automotive original equipment market.

There is no dominant business in the merger of the companies, he noted. Wente said ContiTech and Veyance hope that much of the integration of Veyance with ContiTech will occur in the next 100 days.

“The management takes care of that from both a technological point of view and also from an organizational point of view and market approach, to take a "best of the best,' approach” in terms of putting the two businesses together,” said Wente, who will retire at the end of April after more than 40 years with the firm.

Seymour said the Veyance staff is excited about the opportunity it brings to both the firm and its customers. “The approach that Conti has brought to this has been very open, very constructive,” he said. “They are looking to learn as much from us as bringing innovation to us.”

One thing they won't have to worry about in the early part of the transition is contracts with the United Steelworkers at factories in Lincoln, Neb.; Marysville and St. Marys, Ohio; and Sun Prairie, Wis. After the acquisition was first announced, the firm met with the USW and with ContiTech and contracts with the union were extended two years until 2018.

With the completion of the deal, ContiTech will no longer be able to use the Goodyear Engineered Products brand name, licensed to Veyance by Goodyear, a competitor of Continental, Seymour said. ContiTech still can produce Goodyear-brand products for 30 days but must liquidate its entire inventory within six months.

Going forward, he said the company's products will bear the Continental ContiTech name in all of its industrial markets and the Continental Elite brand for the aftermarket products.

While on the consumer side, the brand is very important, on the industrial side of the business the customers are very savvy to the specifications and features of the products Veyance manufactures. “Right now, the products, the people, the processes and the manufacturing sites will all remain the same,” Seymour said.

Wente said the ContiTech name is strong in Europe and Asia, but ContiTech and its parent Continental do have some recognition in North America. “By keeping the physical structure of our organization, just to change the name is something we can manage in a common approach.”

Seymour has been the second in command at the company since his arrival at Veyance in March 2010, but he'll have more responsibility in his new position as CEO of the North American operations and head of the conveyor belt business.

Prior to joining Veyance, he worked for Black & Decker from 1992 to 2010. He started in sales and marketing and progressed up the ladder on both the consumer and industrial sides of the business.

He eventually was charged with expanding the company's DeWalt brand both organically and through external partnerships.

In 2003, he was appointed vice president for the DeWalt Industrial Power Tool business in Europe, the Middle East and Africa.

Seymour returned to the U.S. in 2006 and was promoted to general manager of Black & Decker's Baldwin Hardware business in Reading, Pa. Because it was a standalone subsidiary, he managed all functions of the business.

His newest appointment at the merged ContiTech operation is his biggest challenge yet, he admitted, but he's looking forward to the opportunity because of the growth potential of the merged company, especially in the NAFTA region.

He said Carlyle's ownership was very supportive of Veyance's investment and direction, and that Hamilton's focus was to create the strongest company possible. But being under a company with a long-term common focus on the rubber industry is one thing that Carlyle couldn't provide.

“The opportunity to work with people who have been in the rubber industry as long if not longer who faced similar challenges and created different solutions is a great opportunity for us from a technical standpoint as well as a commercial standpoint,” Seymour said.