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July 09, 2018 02:00 AM

Cooper Standard sees great potential for Lauren

Chris Sweeney
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    Briant W. Matz, provided by Lauren Manufacturing
    Lauren Manufacturing's New Philadelphia, Ohio, sites will be included in the Cooper Standard deal.

    NOVI, Mich.—Cooper Standard Automotive Inc. has not been shy about its intentions to diversify beyond the automotive industry.

    If it wasn't heard before, its latest deal broadcasts the message loud and clear.

    The firm has entered an agreement to acquire Lauren Manufacturing and Lauren Plastics—two subsidiaries of New Philadelphia, Ohio-based Lauren International Ltd.—for an undisclosed amount.

    Lauren's manufacturing and plastics businesses produce extruded and molded parts of organic, silicone, thermoplastic and engineered polymer products. The units specialize in sealing solutions for industrial and specialty automotive applications.

    "We're excited about the acquisition," said Keith Stephenson, executive vice president and chief operating officer of Cooper Standard.

    "We've spent a lot of time identifying target companies that we think will fit our business profile, but also would be complementary to what we're doing and allow us to accelerate our growth in the non-automotive space within our core technology. Lauren rose to the top of that list when we scanned the non-automotive sealing suppliers. We engaged with their leadership and felt very, very strongly that this was a quality business and a great cultural fit with Cooper Standard."

    The deal is pending regulatory approvals and consent from the related parties. Stephenson said the firm doesn't anticipate any issues and expects the deal to close sometime in the third quarter. All employees, including Lauren's leadership team, will transfer with the business.

    Kevin Gray—chairman, CEO and president of Lauren International—said Lauren was contacted by an investment banker who pinpointed his company as one that would fit within Cooper Standard's Industrial Specialty Group. He confirmed that Cooper Standard was the only suitor for the rubber and plastics manufacturing units.

    Stephenson said Lauren shares a lot of common values with Cooper Standard, specifically a commitment to its employees and a strong sense of giving back to the community.

    "Cooper Standard really emulates exactly the culture, business philosophy and integrity that Lauren Manufacturing and Lauren Plastics has had for its entire business life," Lauren Manufacturing President Lisa Huntsman said. "As we continue to grow by double digits, we understand to get to that next level it always takes the infrastructure and systems to help get you there. As we got to know the executives of Cooper Standard, they're just like us. That gave us great comfort in knowing that these guys are going to be great partners."

    Diversify and conquer

    Cooper Standard said the move will further expand the markets served by its Industrial and Specialty Group, which specializes in accelerating growth and maximizing the value of its products and technologies in non-automotive and specialty markets.

    Stephenson said of Cooper Standard's $3.6 billion in sales, plus another $300 million of unconsolidated joint ventures, more than 95 percent is focused on automotive.

    "They have a burning desire to build that business segment out," Gray said. "After some discussion back and forth, we realized that there was a lot of alignment in our values, in how we do business, and we also realized we had a lot to offer in the area they were looking at. They're very, very good in the automotive space, but they're just really getting a foothold in the industrial and specialty markets. That became extremely appealing for them and we felt this was a great opportunity for both companies to move into this area full steam ahead and do some really exciting things."

    Lauren employs 500 across four facilities within the two businesses—two sites in New Philadelphia, Ohio; one in Kent, Ohio; and one in Spring Lake, Mich. The firm recently added 10 rubber extrusion lines to its operations in New Philadelphia.

    Cooper Standard said Lauren's materials expertise will further strengthen its own extensive material science capabilities. Stephenson said Cooper Standard intends to run the units together as part of a combined ISG/Lauren business.

    "It's about building your brand," Huntsman said. "Lauren has had a brand for 50 years in our marketplace. That's a great complement to what Cooper has already done in automotive, and now bringing those technologies into other markets where we are probably a little further ahead in. That's where we saw this huge synergy between the organizations."

    Lauren's largest non-automotive industry is building and construction—window and door, commercial and residential weatherstrips—also having a presence in marine, RV, truck, bus and pickup trucks in addition to automotive accessories with some aftermarket presence.

    "They have some terrific customer relationships in the non-automotive space," Stephenson said. "We think that when we combine the two businesses, we can help support and accelerate that. They've established a great presence in the non-automotive segments."

    While Lauren does bring some automotive business to the table, it's less than 20 percent of its business. Novi-based Cooper Standard is a Tier 1 global automotive supplier with products including rubber and plastic sealing, fuel and brake lines, fluid transfer hoses and anti-vibration systems. Lauren serves the automotive industry as a Tier 2 supplier, Stephenson said.

    Lauren's automotive business focuses more on the specialty side, with products that are used in lighting, HVAC protectors and body/side components.

    Unique chemistry

    Cooper Standard's desire to diversify has been accelerated thanks to multiple new products and compounds emerging from its innovation program, dubbed i3.

    "We're leveraging our core technologies in material science and process innovation," Stephenson said. "It's not like we're going off and getting into areas unrelated to the core. It's leveraging the best of the core from a material science and an innovation standpoint, but bringing it into the non-automotive space from a very strong foundation we've built."

    The most notable example of that is Fortrex, a new lightweight elastomeric material that combines the best attributes of EPDM and thermoplastic vulcanizates, two common materials used in sealing.

    The firm said Fortrex offers weight savings up to 30 percent compared to EPDM, and avoids the compression set issues associated with TPVs, resulting in a stronger sealing system and reduced cabin noise. It does not weather like EPDM and can be color-matched.

    Stephenson said the application of Fortrex can extend beyond its traditional automotive business into other areas.

    While the compound helps its traditional automotive business, Stephenson said it's already generated many opportunities in other industries. And Lauren is projected to further support that growth.

    "Fortrex is phenomenal," Huntsman said. "The innovation that they have put into this material and the process is phenomenal. It's really going to revolutionize some things."

    New era

    Lauren International's makeup will look significantly different going forward, having virtually exited the rubber and plastics manufacturing industries.

    It will retain its stake in LMI Custom Mixing L.L.C., a joint venture with Meteor Sealing Systems—now a subsidiary of Toyoda Gosei Co.—based in Cambridge, Ohio. The unit represents Lauren's biggest remaining foothold into the rubber industry as it produced compounds for both Lauren's rubber manufacturing units and other outside customers.

    Gray said he expects LMI to continue providing compound for Lauren Manufacturing even after the transaction. Stephenson said LMI will "continue to be an important supply partner to the business."

    As for rubber manufacturing, Gray said there is a very small rubber products presence within Lauren Agrisystems—which sells dairy related products like silicone and rubber liners among its offerings. However, Gray said a lot of those products are produced by Lauren Manufacturing and then sold to the sister subsidiary.

    Lauren International's remaining subsidiaries include Nurtured Pets, a producer of pet products; Lauren Innovations, a software company that produces safety systems for schools; Retail Products and Services sells shelving units and displays into convenient stores; and Flite Test, a manufacturer of remote controlled aircrafts.

    While Gray said the firm will be focusing on all its remaining units, he highlighted Lauren Innovations and Flite Test as ones to keep an eye on. Lauren is seeing increased demand for school safety systems, especially in light of recent events—there were 23 school shootings involving an injury or fatality within the first 21 weeks of 2018. And Flite Test continues to see growth for both its drone and fixed wing product lines.

    "One of our principles is innovation," Gray said. "We have various companies at different levels and different points along the journey. We're going to continue to build those out and look for opportunities—both organically and through acquisitions—to bolt-on some things and do some things that can create tremendous value down the road for these other items we've been working on."

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