Tennessee Rubber Products Company Acquired : Wynn’s Buys Firm to Bolster Original-Supplier Image

In the face of a yearlong slump in the automobile parts industry, Fullerton-based Wynn’s International Inc. said Monday that it has entered into a preliminary agreement to acquire a Tennessee-based rubber products company to boost its presence as a supplier of original as well as replacement auto parts.

Wynn’s, which manufactures automotive accessories and chemical additives, said it will acquire the assets of Precision Rubber Products and its three subsidiaries for $31 million in cash, plus up to 70,000 shares of common stock if certain agreed-upon levels of pre-tax earnings are achieved after the acquisition.

The proposal is subject to a Federal Trade Commission review and execution of a definitive agreement.

Wynn’s president, John F. Lillicrop, said he hopes to close the deal within 45 days.

Precision, headquartered in Lebanon, Tenn., produces rubber seals for the automotive, aerospace and hydraulic industries. The privately held company has 800 employees in seven U.S. plants and in one plant near Toronto. It reported sales of $52 million for the fiscal year ending last April 30. Information on earnings was not available.

Wynn’s, with 2,000 employees in four subsidiaries, posted revenues of $214.4 million last year.

But Wynn’s profits for the last quarter of 1984 and the first two quarters of this year have been at least 25% lower than profits for the corresponding year-earlier quarters.

And, Lillicrop said: “We have not seen any pick-up of business in the third quarter.” He would not project what figures would be in the third quarter, which ended Monday. “If anything, it’s been more difficult than in previous quarters. There’s a general softness in the industry,” he added.

He said most of that softness has been in the “aftermarket,” or replacement-parts market. He figured that about 95% of Wynn’s sales are for replacement parts.

Precision, on the other hand, sells about half its products directly to manufacturers for installation as original equipment, Lillicrop said.

“The primary thing for us is that Precision is very strong in the auto market, both in original equipment and in aftermarket,” he said.

“This deal fits, first, because Precision’s primary business is in the automotive market, and we’ve been interested in expanding that area” and because Wynn’s game plan calls for expansion through acquisitions as well as through internal growth, he said.

Lillicrop said the purchase will be financed through loans but that Wynn’s has not yet decided on a lender.

The 70,000 shares that could be issued as part of the deal would represent less than 2% of Wynn’s 3,700,000 outstanding shares, he said.

Wynn’s executives did not know anything about Precision or its president and primary owner, James Carroll, until a third person introduced them and suggested the arraangement last January, Lillicrop said.

Carroll initially told Wynn’s that his company was not for sale, Lillicrop said, but he added that Wynn’s commitment to keep Carroll and the Precision management team in place helped break down the firm’s opposition. Precision will act as an autonomous subsidiary of Wynn’s, according to Lillicrop.

The acquisition includes the purchase of Precision subsidiaries Precision Rubber Products Ltd. of Canada, Precoril Seals Ltd., a British-based sales office, and U.S.-based Hercules Products Inc.

The largest of Wynn’s subsidiaries is Lone Star Manufacturing Co. Inc., a Texas manufacturer of automotive air conditioners. Other Wynn’s subsidiaries are automotive additive producer Wynn Oil Co., accessories manufacturer Wynn Automotive Products and hardware distributor Robert Skeels and Co.