Full speed ahead: Elite Advanced Polymers growing organically and through acquisition

PLANO, Texas—When private equity firm DestinHaus Capital L.L.C. bought Elite Elastomers a year ago, it made no bones about its desire to grow the company and use it as a base to build a substantial footprint in the U.S. rubber and polymer mixing business.

The firm has been true to its word, growing the rebranded Elite Advanced Polymers Inc. both organically, from its manufacturing operations in Ripley, Miss., and now through a pending acquisition.

"Our goal is to grow in the U.S.," said Murli Nathan, executive chairman of Elite and one of the founding partners of DestinHaus. "We are fundamentally a U.S.-focused manufacturing company. When we acquired Elite, we had about 35 people. Now we are at 65 within one year, just in Mississippi."

With the organic part of the equation in full gear, DestinHaus and Elite are starting to kick in with acquisitions, saying Feb. 10 the firms had reached a definitive agreement to acquire J Dunnam & Co. L.L.C. of Cleburne, Texas, which is about 70 miles from Elite's new headquarters in Plano.

"JD & Co.'s focus on high-quality rubber compounds for high-performance applications fits closely with Elite's vision and strategy," said Seiichiro Araki, named Elite's CEO Dec. 1. "We look forward to continuing the high levels of service to JD & Co's customers and deepening our relationships with customers in the Southern U.S."

According to Elite, JD & Co. has more than two decades of development and mixing experience in specialty rubber compounds, a pedigree that fits well with Elite's own background and specialties in HNBR and fluoroelastomers. JD & Co. also offers technical development for a range of polymers with applications in the industrial and oil and gas markets

When the acquisition is finalized, JD & Co. President Amy Hiett will join the Elite Advanced Polymers team. "We are excited to have Amy Hiett join Elite, bringing over 25 years of custom rubber mixing experience to the team," Araki said.

Hiett said becoming part of the Elite team will embolden JD & Co.'s technical expertise and niche, high-end custom mixing capabilities.

"At JD & Co, we have built our business on providing our customers with the high levels of service that they expect and deserve," Hiett said. "We are confident that this partnership ... will allow us to provide even more resources for our customers to remain competitive in today's environment."

Nathan said Elite approached JD & Co. about the potential acquisition, having been alerted by others in the industry to take a look at the Cleburne-based mixer. "We were not sure how actively they were looking to sell their company," he said. "But we reached out to them and started discussions."

Ahdiv Nathan, Murli's son and a member of Elite's Board of Directors, said the primary interest in JD & Co. was the firm's focus on the specialty side of the mixing business.

"They are largely formulation driven, with most of their compounds coming from proprietary formulas," Ahdiv Nathan said. "A lot of their business is in smaller run, oil and gas and industrial applications in the Texas area.

"They have really tight relationships with their customers, to where we believe they really match our focus on customer service and flexibility."

JD & Co.'s focus on Texas also interested Elite, which is targeting the Southern U.S. as one of its key areas for growth.

JD & Co. concentrates on compounds based on natural rubber, nitrile and HNBR, and also has strong fluoroelastomer capabilities, according to Ahdiv Nathan. Mixing is primarily done on a 55-liter mixer, but it also has flexible open roll mixing capabilities, enabling the operation to supply custom color compounds as well.

Murli Nathan said the business only has five employees, and job offers have been made to the four production employees. "It's a niche business, and we want to leverage what they have based on knowledge and bring capital to it," he said.

Ahvid Nathan said the firm's primary owner, Joe Dunnam, is not active in the business.

Elite is interested in pursuing further acquisitions, Ahvid Nathan said, adding that right now the search is very broad.

Targets include standalone custom compounders and rubber parts manufacturers that have in-house compounding assets they may be interested in selling.

"As long as it fits into what we want in terms of a specialty portfolio, we are absolutely interested in those," Murli Nathan said.

Elite also is looking for sites where it could locate new mixing footprints, he said, noting that these won't be large operations. "We're not looking at huge compounding plants with multiple Banbury lines. It's specialty, but can be beyond elastomers. We are open to looking at silicone, TPEs, TPVs and engineering polymers."

It is with this future growth in mind that Elite relocated its headquarters to Plano, about 20 miles north of Dallas. He said the firm needed its base to be near a major international airport.

"We do envision building this business, where people need to fly in and out," the executive chairman said. "We need access to travel, not just within the U.S., but internationally."

The Dallas region also is one of the areas Elite is considering as it expands its compounding production footprint, and has a good labor pool for such disciplines as finance, administration, human resources and other areas.

"We do believe in the growth we see in the Southern part of the U.S., and the oil and gas industry is a big part of our growth strategy," Murli Nathan said. "Having a presence in Texas, in Dallas, will help us tapping into that industry.

"We're not doing it just for the sake of oil and gas alone, but we do want to be close to that industry."

But just because DestinHaus and Elite have been looking at acquisitions and future production doesn't mean there hasn't been a lot going on at Elite's flagship operation in Ripley.

Elite made a name for itself over two decades—prior to the DestinHaus purchase—providing specialty compounds used in the oil and gas, automotive, industrial conveyor belting and consumer-oriented product industries. Elite has a portfolio of swellable elastomers that are used in the completion of fracking wells, supplying both water and oil swell packers.

Elite has a main, combined custom mixing and warehousing facility in Ripley, which comprises three mixing lines, including a color line. The campus also has a research and development facility.

Murli Nathan said the positives the firm found when it bought the business were the tremendous level of customer service, along with experience on the specialty side of the business—and a huge database of compounding recipes.

There were, however, a number of areas where DestinHaus was able to help Elite.

"No. 1 is procurement. Small companies cannot do as well as larger customers," he said. "It's not just about raw material pricing. We're talking about supply and logistics. Small companies cannot do as well as large companies because they don't have the resources. We brought them the capital for that."

Nathan added that when there is not enough capital growth, people do not think actively about growth.

"But now with capital brought in, it's amazing to see the transformation in terms of ideas being generated, and what we can do in terms of improvement, leading to better reliability," he said.

Production in Ripley was at record levels in the fourth quarter of 2021, and January was the best production month yet by double-digit percentages, he said. Employment has grown because the operation has gone from one shift to two, and a third may be added by the end of 2022.

While the labor environment has been tough over the past year, Nathan said as soon as DestinHaus acquired Elite, it made the decision to focus more on the people. That meant hiking pay significantly and improving benefits for the entire work force.

"For the people on the shop floor, it makes a big difference," he said. "So much so that right now hiring people for us is not a problem in the Ripley, Miss., area. People are aware that our compensation and benefits are among the best in that region. ... It's a cost, but it's an investment in people."

That will come in handy, as Elite is "extremely encouraged" from demand for its custom mixed materials.

"Right now we have a tremendous pipeline of opportunities," Nathan said. But the company also will take care to manage its growth, rather than "growth for growth's sake."

Ahvid Nathan said the procurement angle continues to be challenging from a supply perspective, particularly on specialty grades of polymer. Having global suppliers is helpful in finding the polymer, but with continuing supply chain issues it's taking longer to get the materials to customers.

And whatever the current conditions are in the market, Elite definitely is taking a long-term view of the business.

"We are a global team of people coming from different parts of the world," Murli Nathan said. "We believe in the American Dream. We are here to stay. We are here to build this business in terms of manufacturing. We are looking forward to the years to come."