Columbus McKinnon Corporation
Columbus McKinnon Corporation
Sales: $736.3 (2000)
Stock Exchanges: NASDAQ
Ticker Symbol: CMCO
NAIC: 333120 Construction Machinery Manufacturing; 333923 Overhead Traveling Crane, Hoist, and Monorail System Manufacturing
With a history that spans more than a hundred years, Columbus McKinnon Corporation has made its reputation on the manufacture of chains and hoists. Since going public in 1996 the Amherst, New York-based company has attempted to expand its business through an aggressive program of acquisitions to include the full range of material handling products and services. A stagnant stock price and a string of poor financial results, however, has led to discontent among some shareholders, forcing management to consider selling all or part of the company. Columbus McKinnon employs 4,350 at 76 locations in 14 countries.
When Columbus McKinnon was incorporated in 1929, two different yet complimentary lines of business were brought together: chains and hoists. The hoist component of Columbus McKinnon dates back to the creation of Chicago’s Moore Manufacturing Company in 1875. Moore focused much of its attention on the railroad industry, in particular sliding doors and door hangers for freight cars, but by 1889 the company, now known as Moore Manufacturing and Foundry Company and headquartered in Milwaukee, turned increasingly to hoists, trolleys, and cranes. In 1899 S.H. Chisholm became president of the company, which now became known as the Chisholm and Moore Manufacturing Company. Over the next 30 years Chisholm Moore would develop a line of high speed hoists and hand chain hoists. During the 1920s the company began to offer electric wire rope hoists and electric cranes. In 1928 Chisholm Moore was acquired by the Columbus McKinnon Chain Company.
The making of chain was a craft and until the mid-19th century was mostly produced in small shops, predominantly in England. Created around the turn of the 20th century, the Columbus Chain Company, located in Columbus, Ohio, was one of the earliest American suppliers of fire welded chain. The company had been founded by employees of the Hayden Iron Company, which since 1825 had been producing harness hard-ware but also manufactured coil chain.
The McKinnon half of Columbus McKinnon derives from Canadian-born Lachlan Ebenezer McKinnon. He went from hardware clerk to store owner when in 1878 he became a partner in an Ontario business called McKinnon and Mitchell Hardware. The business focused on saddle and wagon hard-ware. A four-man shop in the back of the store produced wagon gears and a patented adjustable dash. In 1887 McKinnon created a Buffalo subsidiary, the McKinnon Dash Company. He branched out into the manufacture of any number of products that made use of metal, including suspender buckles, as well as bicycles and chains. It was his nephew, Archie McKinnon, who was primarily responsible for McKinnon Dash’s entry into the chain making business. He applied the technique of electric welding to chain in 1905. At least with the smaller sizes of chain, electric welding would replace fire welding. In 1909 the McKinnon Chain Company was formed, using the electric welding process to produce coil, ladder and “sugar” chain, donkey and horse trace chain, lorry and plough trace chain, as well as tire chain for cars and trucks.
In 1917 McKinnon Chain merged with the Columbus Chain Company. In Canada it was known as McKinnon Columbus, and in America it was known as Columbus McKinnon. Either way it was a good fit for both companies. McKinnon brought superior technology, and Columbus brought a better grasp of the American market. The parent company of McKinnon Chain changed its name to McKinnon Industries, and shifted its focus from horses to automotive products. By 1922 McKinnon decided to sell its share of the chain business to the Columbus interests. Two years later L.E. McKinnon died, and in 1929 McKinnon Industries would be purchased by General Motors of Canada.
Shortly after McKinnon Industries sold its chain interests, the business of Columbus McKinnon began to suffer. Its for-tunes were revived in 1925 when one of the board members, Julius Stone, decided to buy the company. Stone was a self-educated son of German immigrants who had worked as a telegraph operator, coal miner, brakeman, and fireman before he became a manufacturer of motorized fire engines in Columbus, Ohio. Among his friends in his lifetime, Stone could count Orville Wright and Albert Einstein. He was a longtime trustee of Ohio State University, also located in Columbus. No matter how deep his ties to the city, however, when he took control of Columbus McKinnon Chain Company, he recognized that the electric welded chain made in New York was in greater demand than the fire welded chain made in Ohio, and in 1927 he moved the company’s headquarters to Tonawanda, New York. By 1931 the Columbus plant was shut down and eight of its 125 forges were moved to Tonawanda. It wouldn’t be until the 1950s that fire welded chain would be completely phased out.
Columbus McKinnon was the sole supplier of the electric welded chain that was used by Chisholm Moore and by the Wright Hoist Manufacturing Company. When a competitor, American Chain Company, bought Wright and the Ford Chain Block Company, Stone felt the need to respond. He purchased Chisholm Moore in 1928, thus joining the manufacture of chains and hoists under one company that the following year would became known as Columbus McKinnon Corp. It was the same year that would usher in the Great Depression.
The 1930s: Challenge, Innovation, and Expansion
Columbus McKinnon, like most businesses, had its share of struggles during the 1930s. One employee was quoted as saying that in 1932, “if an order for a piece of chain came in, everyone could celebrate.” Nevertheless the company made a number of significant improvements in its product lines. In 1931 Columbus McKinnon introduced the first aluminum hoist. In 1933 the company was responsible for one of the most important contributions to the manufacture of chain when it produced the first alloy chain, which would prove to be lighter, stronger, and more resistant to high temperatures than the wrought iron chain it would soon replace in lifting slings. Another new product that helped Columbus McKinnon survive the Depression was the Evans Carloading Hoist, which prevented damage to automobiles as they were loaded into railroad box cars. The company also introduced an electric hand chain hoist, which would be greatly improved when it employed the new alloy chain. In fact, the chain and hoist businesses that came together under Columbus McKinnon seemed to spur one another to innovate and improve. The hoist business would need better chain for a new design, and the chain business would find a way to supply that need. The result was increasingly lighter and efficient hoists. To better coordinate the development of new products, Columbus McKinnon would in 1939 create a separate Research and Development unit.
The first Columbus McKinnon facility to be built abroad was a factory in South Africa in 1935. The company had for years been exporting chain for use in the mines of South Africa. When Stone heard that a British competitor was thinking of building a local plant, he was quick to act. He traveled to South Africa and established McKinnon Chain S.A. near Johannesburg. The new company produced tire chain and ladder chain for the gold mines, anchor chain and trek chain for the oxen.
The War Years
Columbus McKinnon would play a prominent role during World War II, but not under the direction of Stone. He was one of the many “one-dollar- a-y ear” men who went to work for the government during the crisis. The company supplied the Air Force with countless hand hoists. It also supplied both the Navy and Air Force with vast quantities of tie-down chain. Columbus McKinnon was the only company, in fact, that could meet the government’s specification for the strength of military chain.
After the war and through the 1950s Columbus McKinnon grew steadily and solidified its position as one of the most respected manufacturers of chain and hoist. It also made a conceited effort to expand its presence in Europe. Head of product development, Bill Devonshire was picked by Stone to set up a distribution network throughout Europe. Within 20 years Columbus McKinnon products would be available in over 70 countries through more than 100 distributors.
Columbus McKinnon also began to establish affiliations with foreign manufacturers. In Australia, Pitt Waddell Bennett Chains Ltd. was formed to make chain using Columbus McKinnon machinery. In Great Britain a similar arrangement was set up with Wheway Watson Ltd. By the mid-1970s Columbus McKinnon would have subsidiaries and affiliates in Canada, South Africa, Zambia, Australia, England, and France.
We will focus on products of the absolutely highest quality so that they will produce economically measurable benefits and superior value to our customers. We will continue to seek new products and product lines both by development and acquisition. We will edge our way into new markets as against revolutionary diversification. We will stay close to our customers and serve them as we would like to be served by doing exactly what we said we would do. We will continu-ally strive to provide a climate that allows each of us to perform to the maximum of our abilities as individuals, and makes us, collectively, a good citizen of our communities. Because we believe profits flow from doing all things well, we will continually try to do everything we do well.
In North America, meanwhile, Columbus McKinnon opened a Product Development and Engineering center in Tonawanda in 1959. A plant in St. Catharines, Ontario, was built in 1966 to produce both hoists and chain. A hoist factory was opened in Damascus, Virginia, in 1969. A plant that opened in Manatee, Florida, in 1970 was dedicated to the production of Columbus McKinnon chainmaking equipment. In 1971 a Lexington, Tennessee, plant was built to produce carbon chain.
In June 1974 Columbus McKinnon purchased Acquired Engineered Products of MeKees Rocks, Pennsylvania, in what was planned to be a series of acquisitions. It wouldn’t be until the mid-1990s, however, that the company would truly engage in an aggressive pattern of mergers and acquisitions, a strategy that was intended to enlarge the scope of Columbus McKinnon beyond the mere manufacture of chains and hoists.
Late-1990s Bring Expansion and Turmoil
After the 1995 acquisition of three companies—Cady Lifters, Inc., which produced pallet lifters and crane forks; Endor, a Mexican manufacturer of hoists; and Lift-Tech, a Michigan manufacturer of chain hoists—Columbus McKinnon, in order to fuel further expansion, went public in February 1996 at $15 per share and began trading on the NASDAQ exchange. Later in the year, Columbus McKinnon bought Yale International, makers of a variety of material handling products in addition to hoists. Early in 1998 Columbus McKinnon bought Danish Univeyor A/S, an international company that designed, developed, and implemented material handling applications for a number of industries. In addition to providing hoists that worked vertically, Columbus McKinnon was now positioning itself to move materials horizontally throughout a facility, a function that many companies were choosing to outsource and what had become a tempting $2 billion a year domestic market.
In March 1998 Columbus McKinnon purchased LICO Inc., a company that designed and built large conveyor systems that were predominantly used on automotive assembly lines. Using a new revolving credit line of $300 million, Columbus McKinnon paid $155 million for LICO. The one drawback of LICO was its dependence on automakers and the uncertainty when large projects might be put up to bid. Columbus McKinnon also moved to add cranes to its mix of material handling products. In August 1998 the company purchased Abell-Howe Crane division of Abell-Howe Co.
The momentum of Columbus McKinnon was checked, however, when volatility in the automotive industry had an adverse effect on the company. In late August 1998 management warned investors that second quarter profits would fall short of expectations. Columbus McKinnon’s stock dropped 12 percent, to a level barely above its initial $15 price per share. The company instituted a hiring freeze and cut back on discretionary spending, but despite these cost-savings measures it was difficult to continue an aggressive pattern of growth with a low stock price that would make it difficult to pay for further acquisitions by using shares. Management was also reluctant to issue new shares when the company’s stock was valued so low.
Columbus McKinnon continued to make acquisitions, albeit on a smaller scale. In December 1998 it purchased a French firm, Société D’Exploitation des Raccords Gautier (SERG) for $2.94 million. SERG produced swivel joints and rotary unions, and helped Columbus McKinnon to expand its industrial components business. In February 1999 the company purchased Camlok Lifting Clamps Limited and the Tigrip product line from German manufacture Schmidt-Krantz & Co. for $6.3 million. The transaction provided Columbus McKinnon with plate clamps, crane weighers, and other products that complimented the company’s line of hoists. In March 1999 Columbus McKinnon purchased Texas-based G.L. International, a crane builder, for $20.6 million in stock and an assumption of $10.9 million in debt. Columbus McKinnon also announced that it was now in a position to create a network for crane manufacturers, a venture it planned to call CraneMart. Members would be able to command lower prices on essential products, such as steel, by combining forces. In May 1999 Columbus McKinnon solidified its position in this sector by paying $6.6 million to purchase Washington Equipment Co., an Illinois crane manufacturer.
The day after management announced the Washington Equipment deal, on 7 May 1999, the company was caught off guard by an announcement that a group of shareholders wanted to replace the board and look into selling the company. Metropolitan Capital Advisors, a New York City investor group headed by Jeffrey Schwarz, owned 8.5 percent of Columbus McKinnon’s stock. Although Schwarz conceded that management had done a good job running the company, he said he was concerned that increased sales and profits had not lifted the stock’s price. Schwarz’s group had first suggested that management consider selling the company in August 1997, and again in a pair of meetings in March 1999. With all eight directors’ seats up for election at an August 16 annual meeting, a proxy fight for control of the company was now underway. Management contended that the dissident’s strategy was shortsighted and vowed to resist the takeover.
- McKinnon Chain Company merges with Columbus Chain Company.
- Hoist maker Chisholm Moore is purchased.
- Chain and hoist businesses are joined in newly named Columbus McKinnon Corporation.
- Company introduces alloy chain.
- South African plant becomes first overseas facility.
- Company goes public, begins trading on NASDAQ.
- Management wins proxy fight to maintain control of company.
Columbus McKinnon was not the first company to be pressured to sell by Schwarz and Metropolitan. In fact, Columbus McKinnon’s purchase of Yale International in 1996 was the result of Metropolitan’s efforts. The following year the group forced the sale of Raymond Corp, and in 1998 followed the same strategy to pressure surgical equipment maker Circon Corp. into a deal with Maxxim Medical Inc. In all of these cases, stock prices rose and Metropolitan pocketed significant profits. Even when the group failed to force a New Orleans bank, Meritrust, to sell, it still was able to take advantage of an inflated stock price.
Columbus McKinnon management, led by CEO Timothy Tevens, did not disguise its belief that Schwarz was nothing less than a stock manipulator with no long-term interest in the health of the company. It sued Metropolitan, contending that the group had not properly notified the Securities and Exchange Commission of its plans. Metropolitan countersued, and both sides began to actively court shareholders to support them in the upcoming vote, all the while firing salvos at one another through the press. Unfortunately for management, financial results reported in July were flat. A major factor was the automotive-dependent LICO unit (now known as Automatic Systems, Inc. or ASI), which was the victim of the lingering effects of a labor strike against General Motors.
Management of Columbus McKinnon won the August proxy fight with 78 percent of the vote, and enjoyed a spike in the price of its stock. By October, however, the price dropped 22 percent, and Schwarz renewed his efforts to force a sale of the company. When management announced its second quarter results on October 27,1999, investors were stunned to learn that earnings had been so poor that instead of 50 cents a share, the actual earnings were a mere four cents a share. Without issuing an early warning of the results, management all but insured that the company’s stock would be battered. Again the major culprit was LICO, the acquisition of which Schwarz was calling a major blunder. His views were gaining support among shareholders that had to this point been loyal to management, which was now forced to announce that it would be willing to sell or at least restructure the business.
The investment banker that had helped Columbus McKinnon go public, Bear, Stearns & Co., was hired to advise the company on how to maximize shareholder value, likely presenting options that could very well include a sale or merger. Third quarter results reported in January 2000 were again disappointing, but the numbers for the ASI unit was better than expected. To buy time, management postponed its annual meeting. In July Columbus McKinnon announced higher than expected results, fueled in great part by a further rebound by ASI. The second quarter results announced in October showed an even more dramatic improvement. Profits for the quarter exceeded the previous year’s second quarter by 758 percent. Sales for ASI were up 21.7 percent from the prior year. The price of the company’s stock, however, rose only modestly. Management continued to work with Bear Stearns to increase shareholder value, leaving open the possibility that it might still sell all or part of the company. In the meantime, in spite of uncertainty, the company continued to stay the course and try to grow its business.
Abell-Howe Crane, Inc.; Automatic Systems, Inc.; Univeyor A/S; Washington Equipment Company; Yale Industrial Products, Inc.
Cascade Corp.; FKI plc.; Ingersoll-Rand Corp.
Bridger, Chet, “Columbus McKinnon Shareholders Renew Fight to Sell Firm,” Buffalo News, October 26, 1999, p. E5.
“Columbus McKinnon Acquires European Plate Clamp Manufacturer and Product Line,” PR Newswire, February 18, 1999, p. 1.
“Columbus McKinnon Sues to Halt Attempt to Oust Board, Sell,” Wall Street Journal, May 27, 1999, p. B14.
“Columbus McKinnon Suing Dissident Stockholder Group,” Buffalo News, May 27, 1999, p. D14.
“Columbus McKinnon Up for Sale,” Warehousing Management, January/February 2000, p. 7.
Madore, James T., “Amherst Firm Buys Michigan Producers of Chain Hoists,” Buffalo News, November 18, 1995, p. A9.
Montgomery, Robert L. Jr., “Columbus McKinnon Corporation Acquires Univeyor A/S of Denmark,” PR Newswire, January 9, 1998, p. 1.
“One Hundred Years at CM,” Amherst: Columbus McKinnon Corp., 1975.
Robinson, David, “Columbus McKinnon Buys Danish Company in Move into Full Materials Handling Systems,” Buffalo News, January 10, 1998, p. B11.
——, “Columbus McKinnon Buys LICO Inc. Conveyor Firm Acquired for $155 Million,” Buffalo News, March 12, 1998, p. D1.
——, “Columbus McKinnon Buys Manufacturing Firm in France,” Buffalo News, December 15, 1998, p. E6.
——, “Columbus McKinnon Stock Plunges to All-Time Low” Buffalo News, October 27, 1999, p. E1.
——, “Columbus McKinnon Takes Business in New Directions,” Buffalo News, October 4, 1998, p. B11.
——, “How Long Will Shareholders of McKinnon Stay Patient,” Buffalo News, October 31, 1999, p. B9.
——, “Stockholder Group Seeks to Sell Columbus McKinnon,” Buffalo News, May 7, 1999, p. C5.
Williams, Fred O., and David Robinson, “Team of Advisers to Resist Takeover of Columbus McKinnon Corp.,” Buffalo News, May 8, 1999, p. A7.
Williams, Fred O., “Columbus McKinnon Buys Crane Maker for $6.6 Million,” Buffalo News, May 6, 1999, p. D1.
——, “Columbus McKinnon’s Profits Decline 50%,” Buffalo News, January 26, 2000, p. C4.