Specialty Coatings Inc.
Specialty Coatings Inc.
704 East Franklin Street
Richmond, Virginia 23210
Fax: (804) 697-3535
Wholly Owned Subsidiary of Rexham, Inc.
Sales: $650 million
SICs: 2672 Coated & Laminated Paper; 6719 Holding Companies
Specialty Coatings Group Inc. was created in 1991 when James River Corporation sold its specialty papers operations to a management-led team of investors. In 1993 Specialty Coatings Group Inc. was purchased by Rexham Inc., a wholly owned subsidiary of Bowater PLC. Rexham planned to absorb the businesses of Specialty Coatings into existing Rexham operations.
The specialty papers division of James River Corporation was made up of seven divisions. One historic element was James River Graphics, which began in 1932 as the Beveridge-Marvellum Company and manufactured decorative metalloid and crystal finished papers. This company’s name was changed in 1938 to Plastic Coating Corporation. It thrived despite the Depression, opening a sister division, Technifax, in 1949. Technifax manufactured films and diazo-type materials, as well as an engineering paper. Scott Paper Company bought Plastic Coating Corporation, and its sister division Technifax, in 1965, making it a wholly owned subsidiary. The company changed its name to Scott Graphics, then was acquired in 1978 by James River Corporation, and became James River Graphics. Over the years, James River Graphics grew from a few coating machines to a stable of 15 and employed nearly 1,000 people. It had been profitable throughout its years with James River, though the increase in pulp prices had caused a bit of a profit pinch.
Specialty Coatings Group Inc. came into existence as such in 1990, when James River Corporation announced an extensive restructuring plan that included unloading unprofitable operations and lines that were subject to cyclical downturns. The company sought to focus on businesses in which it had a significant market share and was running cost-effective operations; these included its core businesses of manufacturing pulp, paper, and plastic products. The specialty industrial papers division was sold to a group of senior executives in conjunction with a New York investment firm, AEA Investors, Inc. Founded in 1968, AEA Investors was funded and managed by more than 60 current or former chief executive officers of major corporations. The firm usually dealt with non-junk borrowings and tended to leave managements intact. James E. Rogers, former senior vice-president and group executive of James River’s Speciality Papers Group, was leading the management team that joined with AEA to make the purchase. The transaction was for cash, preferred stock, and assumption of some mill leases and amounted to $285 million in cash and $52 million in preferred stock. Specialty Coatings Group leased five of the business’s 22 mills; the other 17 were included in the purchase cost. Four of the mills were in the United Kingdom, including Smith & McLaurin in Scotland and Portlaoise Plant in Ireland. Final agreement wasn’t reached until May 1991. James River Corporation retained 20 percent interest.
From the start, Specialty Coatings’ sales were estimated at $625 million. The specialty papers business was strong at that time, but targeted to small markets. The thinking was that it was a business best run by an entrepreneurial group. Speciality Coatings divided itself into seven entities: Custom Papers Group; Graphics Technology International; H. P. Smith; Decorative Specialities International; Otis Specialty Papers; Glory Mill Papers Ltd.; and Smith & McLaurin Ltd.
Graphics Technology supplied microfilm, phototools, coated films, and papers for use with computer printers and drafting media. H. P. Smith made silicone-coated release liners, and Smith & McLaurin made thermal self-adhesive label stock. Otis Specialty manufactured release liner base paper. Decorative Specialties supplied embossed latex saturated paper-book coverings and packaging, sold under proprietary brand names. And Custom Paper Group made filter papers, absorbent products, and other technical papers.
No longer part of the previously $5 billion corporation, Specialty Coatings considered its modest size an asset. Nonetheless, it was launched during a very troubled time for the paper industry. The economy was weak, and the extended recession had bruised the key markets for specialty papers—automobiles, electronics, hard-cover books, and graphic arts. A year after the birth of Specialty Coatings, sales were off from projections by about 10 percent, but it had paid down on its debt, maintained employment, increased its capital expenditure budget, and was running 20 plants. Specialty Coatings invested in new equipment and instrumentation to increase yields and reduce waste. And its profitability was maintained. With each of the company’s seven business units operating as stand-alone, decentralized entities, decision making time was shortened.
In April 1992, James River Corporation had announced that it would sell its remaining interest in Specialty Coatings, but this deal depended on Specialty Coatings raising money through a public offering. In May 1992 it was decided to postpone the public stock offering because of unfavorable market conditions. Completion of the stock sale would include four James River mills that Specialty Coatings was still leasing.
At this time, the company was involved in three product segments: imaging products, self-adhesive products and specialty products. Imaging products included a broad range of value-added film and paper products such as those used for high quality color presentations. This division produced precision coated paper and film used for by computers and engineers, and polyethylene-coated base paper for use in the manufacture of monochrome and color photographic papers for commercial, industrial, and consumer markets. Self-adhesive products consisted primarily of release liners—important for use in computer-generated color graphics for fleet and poster advertising—and base papers which are coated with silicone and other materials to form release liners. Release liners are sold to manufacturers of decals, pressure-sensitive labels, and other self-adhesive products. Specialty products included filtration media, abrasive backing, cover-grade paperboard, and absorbent and technical grades which are used in diverse industries including manufacturing, automotive, packaging, and graphic arts. It also included book covering.
In February 1992, Bowater PLC, a British industrial conglomerate, announced its purchase of Speciality Coatings for $434 million. With annual sales of more than $3 billion, Bowater was then Great Britain’s largest packaging company, and the purchase would double its coated papers business. The immediate plan was to sell the five leased mills and Custom Paper and absorb the rest of Specialty Coatings into Bowater’s U.S. subsidiary, Rexham Inc., based in Charlotte, North Carolina. Rexham operated 41 plants in the United States and Canada, making packaging, printing plastics, coated industrial films, and building products. Bowater acquired Rexham Corporation and its portfolio of custom coating and laminated businesses in 1987. It added Release Technologies, manufacturer of release films and papers, in 1989. SCI’s specialty in precision coating of specialist films and papers used in the imaging, graphic, and computer industries seemed a perfect fit for Bowater’s strategy, launched in 1990, of developing mass in three areas: health care packaging, personal care packaging, and coated industrial films. SCI would grant Bowater a better balance between coated films and papers and its core packaging and printing activities.
In 1993 Specialty Coatings ranked 471 on the Fortune 500 list, its 1992 sales topping $635 million, and had about 3,300 employees. In April 1993, Specialty Coatings’s Richmond headquarters were being eliminated—shifting to Rexham, Inc.’s headquarters in Charlotte.
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—Carol I. Keeley