DICKSON, Tenn.—After building itself up for four years, Zinc Oxide L.L.C. is ready to take the next big leap.
The firm has acquired Zochem Inc., a subsidiary of American Zinc Recycling Corp. L.L.C., in a deal that the firm projects will create the largest supplier of zinc oxide in North America.
Zinc Oxide said in a news release that the combined companies will generate about $250 million sales for 2017 with a capacity of 95,000 metric tons. It added that the pair are approved suppliers of about 88 percent of the total North American zinc oxide market volume.
The firm added that Zochem's extensive domestic and global distribution network will also remain in place. All of the firm's employees will transfer in the deal for a combined employment of about 100. Financial details were not disclosed.
Zinc Oxide CEO Russ Robinson said that the combination of the two firms had been a long-term goal of Zinc Oxide's ownership, which is headquartered in Dickson with a capacity of about 40,000 metric tons per year.
"When we decided to go into this business four or five years ago, we thought we would make a great fit then with Zochem," Robinson said. "For various reasons, they were just not ready to sell the business. Only recently had they decided it was time to sell their business and they certainly recognized the good fit between us. I believe that there was recognition by both the seller and the buyer that this would be a stronger company together rather than apart."
The combined firm will have a much stronger footprint. Robinson said Zinc Oxide is strong in the southeast and southern U.S. while Zochem brings a Canadian presence that also serves the midwest and northeastern U.S.
Most importantly, Zinc Oxide will have access to a number of new customers already approved by Zochem.
"It's a struggle getting into a new business where the approval process takes so long," Robinson said. "While you're waiting for the approvals from the various consumers, you don't have enough business to become profitable. It was a long, slow process until we had enough approvals, and I'd say that occurred this year, where we were able to run enough capacity to make a profit."
Zinc Oxide has enjoyed its fair share of success since launching in 2013. The company produces zinc oxide powder and pellets for every major market application (high and low surface area, treated, pellets, USP/USFDA) and has become a major supplier to the tire, rubber, chemical, electrical/electronics, animal feed, fertilizer and ceramics markets.
During that time, it also achieved ISO 9001:2008 certification, built out its distribution network to include broad coverage of the U.S. and brought its 170,000-sq.-ft. Dickson plant to operation. Most of its business is based in the U.S., but like Zochem it does some exports.
The combined company will bring synergies in the form of reduced shipping costs and transit times for customers and will combine to draw from a much larger base.
"Given that we're relatively new in the business, the amount of accounts we were approved at were still way lower than our competitors because the approval process takes a very long time," Robinson said. "Zochem brings to us a wide range of consumers that we can serve and geographic diversity. Between the two of us we have excellent geographic coverage."
Founded in 1933, Zochem has been located in Brampton, Ontario, since 1974. Zinc Oxide said the deal includes all of Zochem's manufacturing operations and product lines. Both Zochem's Brampton and Zinc Oxide's Dickson site will continue manufacturing zinc oxide using the French process method.
American Zinc Recycling, formerly Horsehead Holdings L.L.C., also operates a steel dust recycling business and a zinc smelter operation. The firm emerged from Chapter 11 bankruptcy in September 2016 after the U.S. Bankruptcy Court for the District of Delaware confirmed its reorganization plan. The plan eliminated nearly all of the company's debt and converted about $205 million of senior secured debt into equity in the reorganized firm.
At the time of the initial filing, Zochem said its side of the business was financially stable being operated as a stand-alone subsidiary. It was included in the bankruptcy filing because it could provide support and collateral for the investors looking to provide interim, debtor-in-possession financing.