Owens-Corning Fiberglas Corp. said Friday that it has agreed to purchase Armco Inc.'s Newport Beach-based aerospace and strategic materials group for $415 million in cash.
Sales of fiberglass and building materials now account for nearly 75% of the 47-year-old company's business.
The move would make the Toledo, Ohio-based fiberglass giant less vulnerable to swings in the fiberglass insulation market, which in turn is heavily dependent on the housing industry.
At the same time, analysts say, debt-ridden Armco, which has lost more than $1.3 billion over the past three years and has been trying to sell the strategic materials unit for more than a year, can use the cash to pay off creditors and bring its debt-to-equity ratio into better balance.
For Owens-Corning, the purchase of the strategic materials group is seen as an attempt to transfer its high-performance materials technology into markets that would eventually use these tougher materials in consumer and industrial products. Possible uses for the lightweight, fiber-reinforced materials range from automobiles to oil drilling equipment.
"It's a good market with potentially high margin," said Arthur M. Stupay, senior vice president at Prescott, Ball & Turben, a Cleveland-based brokerage. "They've been looking for a way to diversify, and this opportunity looks great."
Until this year, when federal officials released Owens-Corning from a 35-year-old consent decree, the company had been severely restricted from making acquisitions both inside and outside the fiberglass industry. The company's most recent acquisition was a roofing company that it bought in 1977. But the government dropped the consent decree in January, and Owens-Corning is now anxious to expand.
William W. Boeschenstein, Owens-Corning chairman and chief executive, said the acquisition was a "logical extension" of the company's composite material activities, which help improve product durability.
Focus on Military
But, until now, Armco had keyed the division's focus to military applications, such as strengthening the components of ships and missiles. Owens-Corning hopes that it can broaden these applications. "Some day," an Owens-Corning spokesman said, "everything from fishing poles to tennis racquets may use this technology."
The spokesman said that Owen-Corning plans no major changes to the operations, which have been profitable for Armco. The group, which employs 2,400 workers in 24 plants, reported sales of $500 million last year.
The group's three divisions include HITCO, a Newport Beach marketer of reinforced composites; Ladish Co., a Cuday, Wis., manufacturer of custom aerospace components, and Oregon Metallurgical Corp., an Albany, Ore., producer of titanium for aerospace applications.