CPAC Inc., coming off an 8 percent drop in its first-quarter profits, said Wednesday that it has agreed to buy the Ohio-based commercial cleaning chemicals business of IVAX Industries Inc. in a deal worth about $17 million.
CPAC, which has been seeking acquisitions to expand the cleaning and personal care products it now makes through its Fuller Brush subsidiary, said the deal will give the company a greater presence in the commercial cleaning and janitorial services market.
"The commercial side is where we see a lot of growth," said Kate Kreger, a spokeswoman for the Leicester-based company. "We just haven't had a big presence in the janitorial market."
The acquisition will give Fuller Brush, which mostly was focused on consumer products, a much larger presence in the commercial market, which accounted for about $8 million of its sales last year, Ms. Kreger said.
In contrast, the IVAX business, which had about $25 million in sales last year, makes and distributes 177 different commercial chemical products, ranging from floor and carpet care items to air deodorizers, industrial degreasers and hand soap.
The IVAX business, which CPAC is acquiring for $17 million in cash plus the assumption of about $2 million in liabilities, has more than 50 trademarks and markets its products nationally under the Franklin and Masury Columbia brand names. It also produces private-label products.
The deal also will allow CPAC to greatly expand its distribution system for its cleaning and personal care products by adding IVAX's network of about 450 distributors, Ms. Kreger said.
"One of our key objectives is to develop Fuller Brush's brand identity in the commercial cleaning industry through selective and strategic acquisitions of recognized names," said Thomas N. Hendrickson, CPAC's chief executive officer. "Merging the two companies will establish CPAC as a significant player in this fastest growing segment of the cleaning industry."
CPAC, which long has said it wanted to add new business that could be produced at its huge, underused Fuller Brush plant in Great Bend, Kan., said it has no plans to close the IVAX plant in Marion, Ohio, that currently makes the products sold by the new business.
"We're not saying we're closing the Marion plant," which CPAC now is leasing from IVAX, Ms. Kreger said. "Our intent is to continue to run the business as is," she said. "The most important thing is the consolidation of the marketing operations."
Ms. Kreger said CPAC began talking with IVAX about the commercial chemicals business in March. She said CPAC is continuing to look for other acquisitions for both its imaging and personal care and cleaning products business.
The CPAC deal is the latest step in IVAX's plan to sell its specialty chemical business so the Miami-based company can focus on its core pharmaceutical business.
CPAC also said declining sales in its cleaning and personal care business caused its first-quarter profits to fall to $1.68 million, or 23 cents per share, from $1.82 million, or 24 cents per share, a year ago.
The company said its sales declined by 2 percent to $22 million during the quarter that ended on June 30 from $22.5 million the year before.
All of that drop came in CPAC's cleaning and personal care business, which saw revenues fall by 5 percent to $11.3 million from $11.9 million because of lower sales from its direct-selling portion of that operation. CPAC blamed the drop on a reduction in the number of direct-selling representatives.
Sales from the company's imaging business rose by 1 percent to $10.73 million from $10.59 million, bolstered by strength from its foreign operations, especially its European imaging chemical subsidiary in Belgium.