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December 08, 2020 10:14 AM

Nordson to sell screws and barrels product line (updated)

Catherine Kavanaugh
Plastics News
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    Osborn Engineering
    Nordson consolidated Xaloy screw production in Austintown, Ohio.

    WESTLAKE, Ohio—Nordson Corp. will sell the screws and barrels product line in its polymer processing systems division to Chicago-based private equity firm Altair Investments Inc.

    The product line, which includes the Xaloy brand, generates more than $70 million in annual sales and employs 200, Nordson officials said.

    Started in 1929, the Xaloy brand pioneered the use of bimetallic materials to improve the performance of a wide range of plastic processing equipment for both molders and original equipment manufacturers.

    The product line consists of Xaloy manufacturing facilities in Austintown, Ohio, and Chonburri, Thailand. Both facilities are being acquired as well as the equipment, patents and intellectual property, according to Andrew Brickman, an Altair partner.

    The Xaloy business also has sales offices in Germany, Japan, China, India, Turkey, Italy and a strong manufacturers' representative network, Brickman added. About half the customers are plastics processors and half are machinery OEMs, such as KraussMaffei, Davis-Standard, Milacron and Graham Engineering, Brickman said.

    "Xaloy is a 100-year-old brand and many would say it's the brand leader. It has a long history of serving the industry," Brickman said in a phone interview. "We see a great brand, a lot of good customer relationships, a lot of knowledge in the space, and a terrific employee base with global reach. There's literally no market that Xaloy doesn't touch."

    The business unit also has decades of designs, prints and engineering drawings on file of screws and barrels.

    "Their database of knowledge based on years and years of experience is fantastic," Brickman said.

    The incoming owners don't intend to make big changes to the employee base, he added.

    "While the company has a number of patents and intellectual property, I think one of the most valuable things in any company is the know-how of its employees," Brickman said. "We've got a highly skilled workforce that does a really good job making these products. Sometimes all the patent protection in world isn't nearly as good as good people."

    In the release, Joseph Kelley, Nordson's executive vice president and chief financial officer, said the transaction will require "a one-time, non-cash asset impairment charge of approximately $87 million."

    The product line had previously been part of the Industrial Precision Solutions (IPS) segment of Nordson, which has been making equipment to dispense plastics, adhesives, coatings, sealants and biomaterials since 1954.

    Brickman likened the Xaloy brand to what some refer to as "corporate orphans."

    "They're orphans within a larger organization and maybe they don't have someone pounding the table for them," he said. "Sometimes extracting something from a much bigger portfolio and giving it a little more focus or attention can be really beneficial."

    That's what Altair plans to do, Brickman added.

    "All the fundamentals are there for this to do quite well. We think this is just a great opportunity," he said.

    One of the opportunities will likely be realized at the 194,000-square foot screw and barrel factory in eastern Ohio, located between Pittsburgh and Cleveland. Nordson recently opened the site to centralize Xaloy operations that had been in Youngstown, Ohio, New Castle, Pa., and Pulaski, Va. The new facility has large induction furnaces to make bimetallic barrels.

    "They invested quite a bit in new manufacturing equipment and I don't think they have utilized the full potential of that equipment," Brickman said. "Since [the furnaces are] new, we're still tweaking them. If we hone the process, we get better. If we can [improve] process times, we can make things quicker."

    That can be a big benefit, he added.

    "We're in world where no one keeps a lot of inventory around and everyone needs it right way," Brickman said. "If we can do a better job reducing lead times and reducing process times, we believe that can help us grow."

    The new owners don't expect any big growth spurt, however.

    "These are mature markets and this is a mature business," Brickman said. "We're not seeking double digit growth but we think there are some good markets we feel we've underserved."

    Nordson had acquired the Xaloy business in 2008.

    "The product had a unique position in the IPS portfolio," Nordson global marketing manager, Kelly Harings, said in a phone interview. "It will be a fantastic fit for Altair."

    Nordson now will focus more on its NBS Next platform, which calls for putting all resources on precision technology that will deliver profitable growth, according to President and CEO Sundaram Nagarajan.

    "Our screws and barrels product line is a respected market leader in the polymer processing industry," he said in the release. "While this product line no longer fits Nordson's strategic focus, we believe it will do well with Altair. I want to personally thank the employees, who support this product line, for their contributions to Nordson and wish them success in their future with Altair."

    Nordson and Altair entered into a definitive agreement for the sale on Dec. 3 and expect the deal to close in the next 30-60 days, Brickman said.

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