Bermuda-based Tyco International Ltd. bought Graphic Controls Corp. for $460 million in cash, officials said today, in a deal that raises questions about the Buffalo company's plans for a new $16.5 million manufacturing facility on Exchange Street.
Tyco, a global manufacturing company, had 1997 sales of $6.9 billion. It owns a host of companies, including ADT home security and several medical product manufacturers. The company announced in May that it would pay $3.3 billion for U.S. Surgical Corp. of Norwalk, Conn.
Graphic Controls President and CEO Duane B. Hopper said that his company is moving forward with plans for a new corporate headquarters on the Buffalo waterfront, but plans for a 240,000-square-foot factory on Exchange Street are still incomplete.
Hopper said today that he is optimistic the factory project will move forward, and perhaps be expanded, but admitted the possibility that Tyco could cancel the plans.
"With this transaction, I'm optimistic and will be talking to the people at Tyco about expanding the floor plan and adding some things to it," Hopper said.
Local government and economic development officials approved a $14.5 million economic-development package, including tax savings, loans and grants, earlier this year, which convinced Graphic Controls to build in Buffalo rather than relocate to South Carolina.
The factory project is still at square one. The company has not yet completed a land swap with the city for the 10.5-acre Exchange Street tract, or finalized a capital lease for construction with Ciminelli Development Corp., Hopper said.
Graphic Controls is one of the city's significant private sector employers with about 650 jobs.
A scaling back of the Graphic Controls project would be another setback in attempts to revitalize Buffalo's manufacturing base. New Era Cap, a leading manufacturing of baseball hats, recently decided not to pursue plans for a new factory in Buffalo.
Graphic Controls makes medical and industrial charts and disposable medical products. The company's sales have grown from $236 million in 1996 to an estimated $280 million this year. The company signed a contract last year with a major purchasing network for 1,800 hospitals.
Tyco already has a major presence in the medical-product industry, since it owns Massachusetts-based Kendall HealthCare Products, a leading maker of gauze and other wound care items, and medical chart-maker Ludlow Technical Products, a division of Kendall.
"Graphic Controls is an excellent addition to our growing disposable medical products group," said L. Dennis Kozlowski, Tyco's chairman and CEO. "Its products are very complementary to our current line of disposable medical products."
Tyco had an agreement to purchase Graphic Controls in 1994, but pulled out of the deal when the Federal Trade Commission aired monopoly concerns about the combination of Graphic Controls and Ludlow.
The local company ended up being acquired by the New York City-based investment group Bessemer Holdings, L.P., for an undisclosed price. Tyco is purchasing the company from Bessemer.
Hopper said the chart market has changed in the last four years, with Ludlow having a smaller presence, and he believes this acquisition will close by Thanksgiving.
"Tyco has assured us that they are ready to pursue this deal vigorously and get it done," Hopper said.
The Tyco transaction could cause Graphic Controls to refinance its outstanding bank debt of approximately $140 million, including accrued interest.
Graphic Controls has become highly leveraged in the last three years through its own purchases of smaller medical-products manufacturers.
Hopper said his first business with Tyco will be arranging a meeting to discuss expansion of the Exchange Street plan to add other manufacturing lines there.