French Firm to Acquire Furon

Furon Co., a Laguna Niguel developer of specialty plastic products for the commercial and health care markets, is being acquired by the world’s top glassmaker in a transaction valued at $501 million, the companies announced Monday.

The acquisition by Norton Co., a unit of France’s Compagnie de Saint Gobain, will create one of the world’s biggest manufacturers of high-performance plastics used in the electronics, automotive, medical and food and beverage industries.

The combined entity, minus Norton’s abrasives businesses, would have 5,500 employees and worldwide sales of about $830 million, said Dottie Wackerman, a Norton spokeswoman.

Norton will pay $472 million in cash, or $25.50 a share, for Furon, 56% more than the Friday closing price. Norton, which is based in Worcester, Mass., also will pay $29 million for outstanding stock options and assume $116 million in Furon debt.

Furon’s stock surged 54%, or $8.81 a share, to $25.13 on Monday, making it the 12th-biggest percentage gainer in U.S. markets. More than 1.2 million shares changed hands on the New York Stock Exchange, compared with average daily volume of 48,800 shares over the last three months.

The company’s board unanimously approved the deal, which is expected to close at the end of October.

“Furon and Norton complement each other in a variety of things ranging from products to customers to geographic presence,” said Wackerman, the Norton spokeswoman.

No major layoffs are expected at Furon, which has 3,370 employees, including 425 in Orange County, said Michael Hagan, Furon’s chief executive.

Hagan said, however, that he will step down after the deal closes. He will serve as a consultant to Norton for at least a year to help in the integration of the two companies.

Hagan, Furon’s largest individual shareholder, owns 761,253 shares, or 4% of the company, according to the most recent proxy. Based on the acquisition price, his stake would be worth more than $19.4 million in the deal.

Officials at both companies declined to discuss whether Furon would keep its name or be swallowed up by Norton.

Saint Gobain, the world’s top glassmaker, is expanding into plastics because companies are moving into them more at the expense glass, metals and other materials.

Analysts applauded the deal.

Norton’s purchase of Furon, which has annual sales of $493.5 million, will allow it to lower raw material and other costs through economies of scale and to offer customers more products, said Christopher Bodnar of Bear, Stearns in New York. “It’s a win-win proposition for both companies,” he said.

The marriage also will expand Norton’s reach into the U.S. market, said Joel Tiss, an analyst at Lehman Brothers in New York.

Furon is the leading U.S. manufacturer of high-performance plastics, while Norton is particularly strong in Asia and Europe.

“By putting the two companies together, there’s even more potential than either one had alone,” Tiss said.

Lehman Brothers is acting as advisor to Furon. Lazard Freres & Co. is Saint Gobain’s investment banker.

George Angle, now in his 70s, founded the company in a Fullerton storefront in 1955.

Originally named Fluorocarbon, the company made Teflon rings for the aerospace industry and later sold Teflon products to the chemical processing and electronics industries. The company branched out into rubber and plastic products in the late 1970s and 1980s, growing both internally and through acquisitions.

It changed its name to Furon in 1990 and added adhesive and specialty tapes to its offerings. Two years ago, Furon expanded into the medical devices business when it bought Medex Co.

Last week, Furon sold its wire and cable business to Marmon Group Inc.’s Cable USA unit. Financial terms weren’t disclosed.

In the most recent quarter, the company’s net income rose 20% to a record $7.1 million, or 38 cents a share, from $5.9 million, or 32 cents a share, a year ago. Sales for the second quarter, ended July 31, dropped 6% to $117.2 million.

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Bloomberg News also contributed to this report.

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Furon Co. at a Glance

Headquarters: Laguna Niguel

Founded: 1955

Employees: 3,370 (425 in Orange County)

Business: Plastics manufacturer for industrial, health care markets

Chief executive: J. Michael Hagan

Traded on: New York Stock Exchange

Monday close: $25.13, up $8.81 per share

Net income (millions)

1999 $22.6*

1998 21.7

1997 -39.8

1996 13.2

1995 11.4

Sales (millions)

1999 $493.5*

1998 485.6

1997 390.1

1996 344.9

1995 312.1

* Fiscal year ends in January.

Sources: Bloomberg News and Furon Co.