Foster Manufacturing employee June King sorts couplers in bins on the shop floor. Approximately 70 percent of the company's products are sold to distributors.
Foster Manufacturing buys Florida competitor
In one fell swoop, Foster Manufacturing Co. purchased a competitor and a supplier when it bought Plant City, Fla.-based Breco Couplings on May 28.
Three months ago, negotiations began on the deal that gives Foster Manufacturing new manufacturing equipment, an expanded product line and at least one new employee, said George Gilbert, Foster’s vice president of operations. The sale is a step toward retirement for Breco’s co-owners, Florida residents Roy Edgar and Cliff White.
While he declined to disclose a purchase price, Gilbert said Edgar and White would work on a consulting basis while Breco’s operations, inventory and equipment move to Foster’s 2324 W. Battlefield Road facility. The transition is expected to take six months. Gilbert said Breco’s four employees were invited to join Foster’s 38 employees in Springfield.
While the transfer of inventory will start during the week of June 21, larger machinery such as computer numerical control equipment will take longer to move. Infrastructure work to accommodate the new machinery has begun, Gilbert said, adding that an estimated $75,000 to $100,000 in building improvements will include an upgraded electrical system.
The two companies offer similar product lines: both manufacture couplings for hoses and both offer product lines that can be used in air, water, gas and hydraulic systems. They were competitors, but also customers of each other, with Foster purchasing certain hydraulic products from Breco, while Breco looked to Foster for its pneumatic control couplers.
“It was a good match. Both companies have good synergies,” Gilbert said.
Breco’s big draw for Foster was its hydraulic product line, which offers a wider variety of coupling sizes than Foster’s current line, Gilbert said. The new products will help Foster meet requests from its primary client base, which is made up of fluid power distributors and accounts for about 70 percent of Foster’s business. The hope is that by adding Breco’s clients, Foster revenues can increase up to 20 percent, Gilbert said. He declined to disclose 2009 revenues for either company.
Brent Keil, purchasing manager at St. Louis-based distributor John Henry Foster Co., said his company currently carries Foster products, and the Breco acquisition would likely mean more products he can offer his clients, including Springfield Remanufacturing Corp., Northstar Battery Co. LLC, Kraft Foods Inc. and Reckitt Benckiser Inc.
“It will enable us to have access to products we hadn’t traditionally offered,” Keil said. Breco’s clients, too, were primarily distributors, including Kansas City-based Hanna Rubber Co. and Vianney Industries Inc., said Diane Moore, national sales manager at Breco, who answers customer calls on behalf of Foster and expects to stay in Florida as a Foster employee to handle sales and marketing in the region.
While Moore doesn’t see the customer service aspect of her job changing that much, she’s already learning the new products offered by Foster and preparing to teach Foster’s sales staff about Breco’s line.
Gilbert said the company, which will operate under the name Foster Manufacturing, will sell product lines under the Foster and Breco names. Breco part numbers will remain the same, he said, so that Breco clients won’t need to change much in their ordering systems.
The Breco acquisition is Foster’s first since it purchased DynaQuip Controls Inc. in 2005, Gilbert said. That purchase also was made to add product offerings and tap into a new customer base.
Between the acquisitions of DynaQuip and Breco, Foster – like many manufacturers – tightened its belt to work leaner during the recession, trying to maximize efficiencies, Gilbert said.
“Foster had done a very good job of keeping our costs in line, but now we’re at a point where we need to grow, and in order to grow, we needed to build,” he said.
Plans include expanding its role as a government supplier, hopefully to a point where government business could equal 15 percent of total revenues, he said. The company is applying for a U.S. General Services Administration account number, which would put the company and its products in a database searchable by state, local and federal governments in multiple departments. Right now, Foster enters a bid process to win each government order.[[In-content Ad]]