Ohio's RPM buying DAP for cash

Maker of Rust-Oleum to pay $290 million for local company

300 at plant, headquarters

Prospective owner foresees consolidation but no major layoffs

Acquisitions

July 13, 1999|By Kristine Henry | Kristine Henry,SUN STAFF

DAP Products Inc., which made a splash last summer when it became the first office tenant in the renovated American Can Co. in Canton, said yesterday that it will be acquired by an Ohio company for $290 million in cash.

The acquisition by sealant manufacturer RPM Inc., whose brands include Rust-Oleum and Bondex, is expected to close next month. DAP is a subsidiary of the publicly traded London equity firm Wassall PLC.

DAP moved its headquarters and research-and-development operations from Tipp City, Ohio, to Baltimore last summer. The company already had a manufacturing plant -- one of seven in North America -- at Sparrows Point.

DAP has about 125 employees at its headquarters and 175 at Sparrows Point.

"It's terrific," John McLaughlin, DAP's president and chief executive, said of the deal.

"It's great for RPM, it's great for DAP, it's great for our Maryland associates and our other facilities in the U.S. and Canada."

McLaughlin, who will retain his position, said workers shouldn't notice any changes.

"It will be business as usual, and we will continue to grow the DAP business and remain committed to both the city of Baltimore and the state of Maryland," he said.

RPM reported net income of $88 million on $1.6 billion in sales for last year, more than six times DAP's expected sales this year of $250 million.

DAP had assets at the end of last year of $75 million and operating income last year of $23.2 million, McLaughlin said.

Rosemarie J. Morbelli, an analyst at Ingalls & Snyder in New York, said RPM is "a good company" that hasn't always gotten the results expected from its past acquisitions.

"One of their comments all the time is that, `When we make an acquisition, new products can be used by another one of our business entities.'

`Not as much'

"But when we ask for examples it was always the same two or three that came back, which makes me think there was not as much of that as they would have liked," Morbelli said.

"[Every operation] is focused on what they are doing, and it's hard to spend time figuring out what your neighbor is doing."

About a year ago, she said, the company reassigned two managers to oversee different types of operations -- do-it-yourself products and industrial products -- and the new positions are expected to help the operations work together more effectively.

James A. Karman, president of RPM, said there will be no plant closings or "massive layoffs" after the acquisition, but that there will be some consolidation of operations.

`Synergies' foreseen

"DAP will operate as a freestanding company, and the management in Baltimore will be the management of DAP, and I think we'll see a lot of combinations and synergies with existing operations," he said from his office in Medina, Ohio.

Karman said RPM, which has increased revenue and earnings in each of its 52 years, is expected to have about $2 billion in sales this year, half in do-it-yourself products and half in sales to manufacturing plants and schools. DAP is involved only in the do-it-yourself market.

DAP received a $250,000 loan from Baltimore Development Corp., the city's economic development agency, when it moved here last summer.

If at least 30 percent of the company's employees are city residents and that proportion is maintained for three years, $75,000 of the 10-year loan at 2 percent interest could be forgiven, said Andrew Frank, executive vice president of BDC. DAP did achieve the hiring goal the first year, Frank said.

The company also received from the state Department of Business and Economic Development a $75,000 training grant and a $425,000 loan that will not have to be paid back if DAP creates and keeps 135 full-time employees through 2001 and spends at least $5.6 million in renovation of its offices.

The pending acquisition will not affect those agreements.

Pub Date: 7/13/99

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