When senior managers at the automotive division of Avon Rubber PLC complete their purchase of the unit, the new stand-alone company will have a greater opportunity to work with automakers, says automotive division President Lee Richards.
One reason is that the buyout group, headed by Richards, is backed by Red Diamond Capital, a private-equity company based in New York. Mitsubishi has a financial interest in Red Diamond, Richard says, which can benefit Avon Automotive Inc.
The deal also will give Avon Automotive greater global leverage in obtaining better pricing for raw materials and some assistance in developing a meaningful presence in Asia and China, Richards says. And, he adds, Red Diamond will be willing to invest in the business's new technology and growth opportunities.
"I'm excited," Richards says. "This is the chance for the company to grow and make investments in technology and acquisitions."
The acquisition, worth $115 million, is expected to close in early July. The sale will take Avon Rubber out of the automotive business. The deal has the support of Avon Rubber's major shareholders, Richards says.
Included in Avon Automotive's purchase are 12 manufacturing plants in 10 countries. Two of those are in Michigan: a 230,000-square-foot factory in Cadillac that makes rubber coolant and fuel hoses and does custom compounding, and a smaller site in Manton that produces molded rubber components.
About 3,500 are employed in the automotive division globally; no layoffs or plant closures are planned, Richards says.
Red Diamond and Avon Automotive management have set up Petrol Automotive Holdings Inc. to handle the acquisition.
Avon Automotive, which has annual revenue of about $349 million, plans to keep its global headquarters in Cadillac. Eight members of the management buyout team operate there. A smaller group of team members will remain in England, says Richards, who has been with Avon Rubber for 19 years.