By Brent Snavely, Crain's Detroit Business
Chicago, Illinois -Â Chicago-based Wynnchurch Capital intends to use Metzeler Automotive Profile Systems-North America of Madison Heights as a platform to create a global automotive supplier.
Wynnchurch Capital acquired Metzeler's North American division in September and announced the appointment of Rob DePierre as the company's new CEO last week.
â€œWe are looking at acquisitions that can expand us into low-cost countries, we are looking at acquisitions in the US ... we are looking everywhere,â€ said Terry Theodore, a Wynnchurch partner. â€œWe really believe we can grow it into a global supplier.â€
Theodore said Metzeler's North American headquarters will remain in Madison Heights, where it employs about 100.
While Wynnchurch's acquisition of the US operations of Metzeler will create a new company with its global headquarters in metro Detroit, the other half of Lindau, Germany-based Metzeler also landed in local hands.
On Aug. 31, Cooper-Standard Automotive Inc. acquired Metzeler's European operations from CVC Capital Partners, a London-based private-equity firm. Metzeler's European division had 2006 sales of about $400 million.
In both North America and Europe, Metzeler makes automotive sealing systems for doors, windows, trunks, lift gates, sunroofs and hoods.
Theodore said Wynnchurch decided to purchase Metzeler's North American operations because its North American plants are profitable and the company has growth potential.
â€œWhen we looked at Metzeler, we were impressed. We thought they ran their business about as well as we've seen any supplier run their business as a middle-market auto supplier,â€ Theodore said.
With annual sales of between $250 million and $300 million, Metzeler's North American operations include the Madison Heights headquarters, a technical center in Tennessee and six plants - four in the United States and one each in Canada and Mexico.
But Eric Merkle, vice president of forecasting for Grand Rapids-based automotive consulting firm IRN Inc., said Wynnchurch will face difficult competitive and market conditions in North America.
For starters, most of its revenue is from the Detroit 3, and their market share continues to slide. Second, Metzeler will not only compete against the larger Cooper-Standard, but also against Farmington Hills-based GDX Automotive and Hutchinson Sealing Systems North America Inc. of Auburn Hills.
â€œThat whole industry is really tough,â€ Merkle said. â€œYou are in an environment where you have material costs that are increasing, and you've got an automotive market here in North America that has been declining.â€
Even though Wynnchurch was impressed with Metzeler's North American management team, the private-equity firm decided to name DePierre as CEO, replacing Mark Drumheller, Metzeler's former CEO in North America.
DePierre previously served as CEO of Auburn Hills-based Android Industries L.L.C., another company owned by Wynnchurch.
â€œMark was a very good CEO and did a great job running Metzeler,â€ Theodore said. â€œBut it became apparent to all of us, including Mark, that our objective of growing the business through acquisitions didn't line up well with his objectives.â€
Theodore said Wynnchurch did not get the chance to buy Metzeler's European division, because by the time his firm was alerted to the deal, the European division was already committed to Cooper-Standard. Also, Cooper-Standard has the right to continue to use the Metzeler name, while Wynnchurch plans to adopt a new name.
Sharon Wenzel, vice president of corporate communications for Cooper-Standard, said Cooper-Standard acquired Metzeler's European operations to diversify its customer base.
Cooper-Standard paid 100 million euro, or about $141 million, to acquire eight plants in Europe, a joint venture in India and a joint venture in China. Together, the operations generated about $400 million in sales in 2006.
Metzeler's main European customers include Fiat S.p.A., BMW AG, Daimler AG and Volkswagen Group.
â€œThe European business of Metzeler fit into the strategy of wanting to extend further into Europe and also India and China,â€ Wenzel said.
Cooper-Standard was created in December 2004 when Goldman Sachs Capital Partners and Cypress Group L.L.C., both of New York, acquired the automotive segment of Findlay, Ohio-based Cooper Tire & Rubber Co. for $1200 million.
â€œCooper's biggest weakness has been its lack of geographical diversity. They are very reliant on the Big 3,â€ said Shelly Lombard, corporate credit analyst for New York-based Gimme Credit L.L.C. â€œBuying the North American operations would have made no sense for them.â€
According to credit rating agency Standard & Poor's, Cooper-Standard's annual sales to the Detroit 3 will decline from 63 percent to 54 percent because of the Metzeler deal.
Since it was formed, Cooper-Standard has acquired several companies, has expanded in Europe and has entered into a joint venture in Korea. For example, in September 2006, Cooper-Standard spent $201.6 million to acquire the automotive fluid handling systems business of White Plains, N.Y.-based ITT Industries Inc.
â€œThe (Metzeler) acquisition is consistent with Cooper-Standard's business strategy of expanding through acquisitions, and Cooper-Standard has a successful track record of integrating acquired properties,â€ said Standard & Poor's credit analyst Nancy Messer in a report issued in September.
From Crain's Detroit Business (A Crain publication)