The sale of Outokumpu American Brass to a Swedish investment firm ends the uncertainty hanging over the North Buffalo plant since the "for sale" sign went up seven months ago, managers and union officials said.
On Tuesday, Finland's Outokumpu Oyj announced it has agreed to sell its copper division, including the 640-job Buffalo plant, to Nordic Capital of Stockholm for $770 million.
"Our first impressions are, it's a positive move," said Brian Clark, president of United Steelworkers of America Local 593, which represents about 480 hourly workers. "We've been told it's a well-respected management group."
The deal is expected to close in June. It ends a waiting period that Outokumpu began last August, when it announced it would leave the copper business to focus on stainless steel.
Nordic Capital owns 22 European companies with combined sales of $7.9 billion, from makers of playground equipment to medical devices and ATM machines. The Swedish firm is buying Outokumpu's global copper operations with 27 sites in Europe, North America and Asia.
The investment firm will probably cash out its stake in about four to seven years, said Jack B. Alonge, human resources director at the North Buffalo plant. The copper operations could be sold to another metal producer or spun off in a stock sale. Nordic Capital has invested in more than 60 companies since it was formed in 1989.
Local management isn't expected to change, Alonge said. The investment group relies on management in place to run operations, he said.
Some workers applauded the investment that Outokumpu has poured into the plant over the past 15 years, and wondered if Nordic Capital will continue the trend.
"You never know with an investor if it's going to be good or bad," said David Pyzynski, a machine operator and 37-year employee. "I hope they're not going to grab us and just sell us off."
With sales of $250 million to $300 million a year, the North Buffalo plant is a significant part of Outokumpu's copper group. It accounts for about 10 percent of the group's 6,400 workers and 12 percent of its $2.2 billion annual sales.
Operating at about 80 percent of capacity, the plant is at the break-even point financially, Alonge said. Its size, covering over 1 million square feet, makes volume the key to profitable operation.
The plant has recalled workers on layoff and is preparing to hire production workers, Clark said. The Steelworkers' contract, in the second of its three years, is unchanged by the ownership switch, he said.
Opened in 1906, the plant on Military Road at Sayre Street melts copper and brass, rolls it into sheets and cuts it into strips up to four feet wide. The finished product is wound on spools weighing over a ton.
Much of Buffalo's output goes to a sister plant in Franklin, Ky., that makes tubes for air conditioners, plant manager Joost M. Vles said. The metal is also used for auto radiators, caskets, Zippo lighters and electrical connectors.
Outokumpu Oyj bought the American Brass plant in 1990 from a group of local investors. The copper operations can keep the "Outokumpu" name for up to a year after the sale before picking a new name. "Hopefully it'll be something easier to pronounce," Clark said.
The sale comes at a time of record high commodity prices for copper, at about $1.50 per pound -- a mixed blessing for producers, officials said. High industrial demand is keeping producers like Outokumpu busy, but they must pay rising prices for raw metal and hope to pass on the added cost. Meanwhile, customers are wary of ordering more than necessary for fear of being stuck with surplus if prices fall.
"We see good prospects for Outokumpu Copper to develop and grow," a statement from Nordic Capital partner Bo Soderberg said. Its strengths include access to Asian markets, development of new products, engineering expertise and a track record of quality, he said.
Outokumpu, with sales of more than $9 billion, will record a loss of $280 million on the sale. Not part of the sale is its Tube and Brass division.