Management buys Preferred Compounding

ERJ staff report (R&PN)

Barberton, Ohio -- Preferred Compounding Corp. of Barberton, Ohio, has been purchased by a group consisting of some of its own executives and a Dallas-based private equity firm, Wingate Partners.

Preferred Compounding said it will announce later today that the buyers have purchased the company from Watermill Group, a private equity firm in Lexington, Massachusetts. Preferred Compounding produces custom rubber compounds for moulders, extruders and other manufacturers and has about 200 employees.

The private company did not disclose its revenues or the purchase price in announcing its sale. However, Preferred Compounding CEO Kenneth Bloom said in an interview last May that the firm had sales of about $90 million for the trailing 12-month period. Those sales were about 30 percent below its 2007 levels but were increasing at the time, Bloom said.

Analysts and industry observers have given Bloom and Watermill high marks for bolstering the company's capital position and increasing its breadth of capabilities, often via acquisitions. Now Bloom said he hopes to continue to do more of the same under new owners he said also would be supportive.

“Wingate is intimately familiar with what it takes for a company like Preferred Compounding to be successful and fully supports our current management team, operational footprint and strategic direction,” Bloom said today.

The sale marks the second time Watermill has purchased and then sold a controlling interest in Preferred Compounding. It was the company's majority owner from 1996 to 1999, before buying the company again in 2001, Watermill partner Tim Eburne said.

Wingate, the buyer, said on its website that it specialises in buying underperforming companies, companies with incomplete management teams or companies in out-of-favor industries. Wingate managing partner James Johnson indicated Preferred Compounding was in the latter category. Bloom himself has characterised the compounding business as mature and slow-growing, but with niches still available for highly engineered, high-margin products.

“Preferred is a well-managed company with a strong commitment to servicing customers that goes beyond simply making high-quality compounds,” Johnson said. “We expect that their proven ability to deliver added value with every shipment will continue to earn new and loyal customers."

From Crain's Cleveland Business via Rubber & Plastics News (Both Crain publications)

Press release from Preferred