O.C. Air Bag Maker to Buy Fabric Supplier for $56 Million
Auto air bag maker Safety Components International Inc. said Tuesday that it plans to acquire a major supplier of air bag fabric in hopes of gaining an edge in the fast-growing but increasingly competitive industry.
The deal calls for Costa Mesa-based Safety Components to pay $56.3 million in cash to purchase the air restraint and technical products division of JPS Automotive L.P. from parent Collins & Aikman Corp.
The acquisition is expected to boost Safety Components’ annual revenue by more than $80 million, to about $200 million.
The JPS air-restraint division, based in Greenville, S.C., is the largest supplier of air bag fabric in North America, with a 40% market share. Its customers include big air-bag system manufacturers such as TRW Inc., AlliedSignal and AutoLiv Inc.
The unit will operate as a wholly owned subsidiary of Safety Components, with management remaining largely intact.
JPS “fits our strategic plan to become the industry’s global, low-cost leader in air bag fabric and cushion manufacturing,” said Robert A. Zummo, Safety Components’ chief executive.
“It’s a fast-growing market, everyone wants to be in it,” said analyst Gary Krieger at Olde Discount Corp. in Detroit. “But it’s getting to the point where there’s going to be a slowdown in the next few years,” so companies are positioning themselves through mergers and acquisitions, he said.
Combining Safety Components’ cushion-making operations with the JPS fabric business allows the company to “package” sales of the products to air bag systems manufacturers, said Chief Financial Officer Jeffrey J. Kaplan.
The acquisition also will give Safety Components an advantage as it expands into foreign markets, particularly China and Europe, Kaplan said.
In its fiscal year ended March 31, Safety Components earned $2.2 million on sales of $84 million.
Under the JPS deal, Safety Components will purchase the assets and assume the operating liabilities of the air restraint division, including 18 looms due for delivery soon. It also will assume less than $1 million in debt owed through JPS leases.
Safety Components said it is also negotiating to buy a 350,000-square-foot building next to JPS’ plant for about $1.25 million.
The company said it expects to issue $80 million in debt securities to help finance the acquisition and to reduce its bank debt.
Collins & Aikman, a major supplier of automotive interiors, acquired JPS in December for $220 million. But Collins was mainly interested in JPS’ auto carpet and trim business, said Raymond Mucci, an analyst at Baird, Patrick & Co. in New York.
Safety Components closed at $9.75 a share Tuesday, down 25 cents, in Nasdaq trading.
