Nov 3 2006
K-Tron International, Inc announced the signing of a definitive agreement to acquire certain assets of Wuxi Chenghao Machinery Co., Ltd. ("Wuxi Chenghao"). Wuxi Chenghao is a privately held company and is one of the leading feeder and ancillary equipment manufacturers for the plastics compounding and injection industries in the People’s Republic of China (the "PRC").
The total cost of the transaction over a five-year period, including the purchase price and payments under related employment and other arrangements with Wuxi Chenghao's current owner, could be as much as approximately $3.5 million. The acquisition is expected to close early in 2007 and is subject to various closing conditions, including certain required governmental approvals in the PRC. Wuxi Chenghao is located in Luoshe Key Open Industrial Park, Wuxi City, in the Huishan district of Jiangsu province, approximately 60 miles west of Shanghai.
The company designs, manufactures, markets and services volumetric and gravimetric single and twin screw feeders and controls, vibratory trays, pelletizers and pneumatic screen changers for use in plastics compounding and injection molding processes. Wuxi Chenghao, with approximately 60 employees, was founded in 2002 and has established a leading position in the domestic PRC market for industrial feeders. K-Tron expects to obtain approval to form a Wholly-Foreign Owned Entity ("WFOE") under PRC laws which will purchase certain assets from Wuxi Chenghao and serve as the entity to conduct the business following the closing.
Wuxi Chenghao’s top management is expected to join the WFOE following the completion of the transaction, including the current owner and General Manager, Mr. Wang Hongliang. Kevin Bowen, Senior Vice President of K-Tron responsible for its process equipment business line, will serve as Chairman of the Board of the WFOE and will have operating responsibility for this venture.
Commenting on the acquisition, K-Tron Chairman and Chief Executive Officer Edward B. Cloues, II said, "The acquisition of Wuxi Chenghao will be a major step forward in K-Tron’s strategic plan to expand our global leadership position in feeding and pneumatic conveying equipment for difficult-to-handle materials. K-Tron has served the upper-tier PRC market for many years by selling this equipment primarily to multinational end users through resellers in Europe and the United States, through independent representatives in the PRC and by providing support through our Representative Office in Shanghai which we established in 1996. The domestic PRC market for plastics processing equipment is growing at double-digit rates, and this acquisition will enable us to address the domestic customer base with products designed and manufactured in the PRC and sold in local currency."
Added Kevin Bowen, "This is an exciting expansion of K-Tron's process equipment business line. The PRC has developed into a leading area for base-resin manufacturing and plastics compounding, which are core markets for our feeders and pneumatic conveying equipment. This transaction will significantly increase our presence in the PRC and allow us to take advantage of domestic manufacturing and labor efficiencies. And with Mr. Wang, his management team and the employees of Wuxi Chenghao continuing to operate the business, we will immediately benefit from established and credible customer relationships and supply chain processes. We already have a manager from our U.S. operations working with Wuxi Chenghao's management on site to assure a smooth transition once the new WFOE becomes operational."