Exolon-ESK Co. is on its way to becoming twice the company it now is.
The City of Tonawanda abrasives manufacturer said Tuesday it has reached a two-pronged deal that will almost double the company's sales and add extensive operations in Europe to complement its existing North American operations. And several major Exolon shareholders said they have agreed to buy the 50 percent stake in the company owned by its German partner, ESK, in a move that will end the company's divided ownership structure.
The deal, if approved by shareholders and government regulators, would add about $70 million to Exolon's annual sales, which reached $78.1 million last year, and give the company a solid European presence by adding manufacturing plants in the Netherlands and Germany.
"It gives us incredible stability and growth possibilities," said Robert Rieger, Exolon's president and chief executive officer.
"We were a North American company that dabbled in the world," Rieger said. "In the competitive world, we have to get out into the world and fight it out with anybody."
The deal to buy ESK's European assets for an undisclosed price will add ESK's furnacing plant in Delfzijl, the Netherlands, which makes rough silicon carbide, much like Exolon's U.S. factory in Hennepin, Ill.
Exolon also is acquiring ESK's finished grain processing plant in Grefrath, Germany, which grinds the silicon carbide made at the Netherlands factory into smaller sizes that are used to make grinding wheels, sandpaper and other products. The Grefrath plant does work similar to what is done at Exolon's facility on East Niagara Street in the City of Tonawanda.
Exolon also is acquiring some of ESK's specialized technology used at its plant in Kempten, Germany, to make tiny silicon carbide powders that are used to cut silicon wafers, such as those used to make computer chips, and for delicate polishing processes, among other things.
Exolon plans to continue to make the fine silicon carbide powders, known as microgrits, at the Kempten plant for another year or two, until those processes can be moved to the Grefrath factory, said Michael H. Bieger, the company's chief financial officer.
Rieger said the microgrit business was an important part of the acquisition because those fine products, which can be smaller than a grain of talcum powder, will move Exolon into the high-technology end of the abrasives business and give the company a product line that is much more profitable than its standard abrasives products.
"We're trying to take the commodity aspect out of the business as much as possible," Rieger said.
The microgrit business will account for about 10 percent of Exolon's total sales, but its share of the company's profits will be much higher, said John Redshaw, the firm's vice president of sales and marketing.
In the second part of the deal, Exolon's major shareholders and their affiliates have agreed to buy out the 50 percent stake in the company that currently is owned by Wacker Chemical Corp. through its ESK subsidiary.
The buyout, which will cost about $19 million based on Tuesday's closing stock price of $36.50 per share, will solidify Exolon's ownership in the hands of the investor group that gained control over much of the other half of the company's stock during an often-bitter fight between its U.S. shareholders and the Wacker group during the early 1990s.
That fight started when Wacker offered to take the company private by paying $19.40 for each share of common stock it did not already own. But a few months later, the group of dissident shareholders challenged the Wacker offer, leading to a contentious ownership dispute that dragged on for more than four years before eventually dying down.
Theodore E. Dann Jr., Exolon's chairman, said the buyout by the major shareholders makes sense from a business point of view, just as it did when Wacker proposed its buyout eight years ago.
The latest bid to buy out ESK is expected to be accepted by the German company, which decided a couple of years ago to move out of the silicon carbide business.
Exolon's profits fell by 1 percent last year to $5.25 million, or $5.08 per share, from $6.1 million, or $5.90 per share, a year ago, mostly because earnings from the company's Norwegian joint venture slid by $236,000 and unfavorable exchange rates. Exolon's 1996 profits also were inflated by an insurance settlement.
The company's sales rose to $78.1 million in 1997 from $77.5 million the year before.