US rubber parts manufacturer to boost European operation

Twinsburg, Ohio – Q Holding Co. manufacturer of precision-moulded elastomeric components, is about to make a big splash in Europe.

The deal, which Q CEO Randy Ross said is projected to be finalised in January, will more than double Q Holding's employment to about 3,000 people, with Degania bringing 1,700 associates to the combined company. It also will give Q's global footprint a major boost. The firm currently operates nine facilities – five in the US, two in China, one in England and one in Mexico.

Degania operates out of four sites in Israel, France, India and Slovakia, with France and Israel as the firm's primary research and development hubs. Q is acquiring Degania from a trio of private equity firms – Viola Private Equity, Kibbutz Degania Bet and Israel Growth Investors – through its own private equity owner 3i Group PLC.

The transaction price was not disclosed. According to a 3i news release, Degania's revenue exceeds $85 million (€81 million), which more than doubles Q's medical sales. Ross said that Degania's employees will transfer with the firm.

"We really love the culture of the company," Ross said. "We respect what the management team has done with it, their drive and vision for what they want to accomplish. Our objective and our goal is to retain the core management team and give them some enhanced products and technology to work with."

Complementary deal

The deal brings many advantages for both companies. Ross said each firm will benefit from the other's global footprint, with Degania also leveraging Q's strong positions in China and the NAFTA region in the same way Q will benefit from its position in Europe and the Middle East, creating a leader in precision elastomeric medical device components.

"The absolute best way to influence decision makers with our products and technologies is to demonstrate those in the local market," Ross said. "That's why we really try to create a global company, you need to be in the major development markets. You need to manufacture close to where your customers are consuming."

Q said Degania goes to market through three brands. Degania, a premier developer and manufacturer of medical catheters for global medical device OEMs; Arthesys, a cardiovascular and peripheral vascular catheter designer and manufacturer specializing in catheters for stent delivery; and Biometrix, a manufacturer and provider of catheter-related kits for hospitals and health care distributors.

Degania also brings a network of assembly and packaging capabilities, primarily located at its India and Slovakia facilities. Ross said the firm offers complete device building, packaging, labeling and sterilization, which allows it to offer a complete product that can enter into a medical original equipment manufacturer's distribution channel and go directly into the market.

Combined with Degania, Q said it will be able to offer an unprecedented suite of development and manufacturing services, material technologies, analytical tools and industry expertise. The business will offer product lifecycle management with assembly, packaging and 510K management for customers looking to outsource.

Degania's France facility focuses on making critical components with its catheter R&D capabilities primarily operating out of that site. Ross said Israel is very similar to a Q site, offering silicone molding, extrusion and overmolding.

"This was an aspiration for Q," Ross said. "We've been developing our own line of catheters and working with OEMs to put them into the market, but this is the essence of Degania. They've been occupying this space for 20 years, has all the established practices and procedures, and they've been doing it in very desirable markets."

New customers

Another big benefit to both firms will be access to new customers.

Ross said Degania's Israel operations holds a unique position within the region, as its silicone R&D is primarily conducted at that facility. It's also a predominant distributor of medical devices within the country.

Q deals with global medical OEMs in the European region; however Ross said the process of acquiring Degania opened its eyes to many regional customers with a strong size, scale and scope that were not on Q's radar because it did not have a deep enough presence in the region. Degania's inroads with that network in Europe, India and the Middle East will allow Q to cross-sell its products into the local market.

"They get special access within the Israel market that gives them better access to clinicians in the development or the improvement of medical devices," he said. "It's a pretty unique position in Israel, and obviously Israel is one of the more advanced research and technical locations in the world. They have access to universities and great people, coupled with direct access to the Israeli market."

He added that with both companies deeply rooted in silicone technology, the pair fit perfectly together, which will make the combined firm more attractive to medical OEMs.

"Customers in our markets are not interested all the time in adding new suppliers," Ross said. "I'd say the preference would be to reduce the number of suppliers, not add more to it. When you build a bigger menu of products that you can deliver to a customer, you create a platform that's very desirable."