In December 2004, Henkel acquired Sovereign Specialty Chemicals for approximately $575 million. At the time of the acquisition, Sovereign was considered the largest privately owned adhesives manufacturer in the United States. Sovereign had a worldwide workforce of approximately 900 employees and sales for the 12-month period which ended June 30, 2004, of $391 million. Its product range encompasses technologically sophisticated adhesives, sealants and coating materials designed for various industrial applications, as well as for the craftsmen and DIY market segment.
How will the acquisition affect the adhesives businesses of Henkel (and Sovereign)?Colquitt:The Henkel Group operates in three strategic business areas - Home Care; Personal Care; and Adhesives, Sealants and Surface Treatment. With nearly 90% of Sovereign's sales in the United States, this acquisition positions Henkel North America solidly as the number-two supplier of adhesives and sealants in the craftsmen and DIY market.
Sovereign also has a strong market presence and a diverse product offering in the industrial segment that accounts for two-thirds of its overall sales. Within this segment, the acquisition strengthens Henkel's activities in the packaging, graphic arts, woodworking, product assembly and transportation markets. This is an ideal complement to our existing industrial market strategy, and gives an even greater depth and breadth of product solutions to our customers.
Will any plants be closing in the near future?Colquitt:Through the acquisition and integration process, we identified redundant administrative resources and manufacturing capabilities in certain areas. To consolidate these capabilities, Henkel is closing the Sovereign corporate office and restructuring the Henkel Technologies manufacturing operations, as well as the Consumer Adhesives site in Canada. As a result, six facilities in the United States and Canada will be closed over the next two years. All employees have been notified and production at the closed sites will be transitioned to other sites in North America.
Will Sovereign retain its name or be consolidated within Henkel businesses?Colquitt:Founded in 1996, Sovereign Specialty Chemicals was essentially a holding company that built a strong portfolio of adhesive technologies through the acquisition and integration of established niche specialists. These specialists included Croda Adhesives, Pierce & Stevens Corp., SIA Adhesives Inc., Tanner Chemicals Inc., Imperial Adhesives Inc., and OSI Sealants Inc., as well as other complementary acquisitions.
Although Sovereign products are widely used throughout various industries, there has been no consistent strategy to market their technologies under the Sovereign brand. Thus, the name Sovereign is not highly recognized in the marketplace. So, where appropriate, we intend to market these technologies under the Henkel brand name and/or one of our other popular sub-brands, such as the Loctite® or LePage® brands. For the Sovereign brand names that have high recognition, such as OSI®, Pro-Series®, and POLYSEAMSEAL®, we will continue to leverage these brands in our marketing efforts.
What will be the long-term affects on Henkel's corporate plan?Colquitt:One of Henkel's ongoing initiatives has been to strengthen its presence in the North American market. In addition to Sovereign, other notable acquisitions for the Henkel Group in 2004 include Dial Corp., Orbseal LLC, Indola Cosmetics and Concorde Participation. With the successful completion of all acquisitions made last year, the Henkel Group will generate about 25% of its sales in the United States.
Relative to the Henkel adhesives and sealants business area, the market trend in adhesive usage has been strong. More craftsmen, DIYs and industrial manufacturers are relying on adhesives and sealants to either augment or replace traditional methods of assembly. Given the process and performance benefits of adhesives, we strongly believe this trend will continue for the long run. With that said, the acquisition of Sovereign further enhances our ability to provide our customers with the best overall solution for their assembly challenges.
Julian Colquitt has more than 25 years of experience with Henkel. He joined Loctite Corp. in 1978 as a sales engineer and has held increasingly responsible positions in the sales ranks, including Regional Sales manager, General Sales manager, and vice president of Sales for North America. He moved into business management as vice president/general manager, Loctite Industrial. From 2000 to 2003, he was president of Henkel Adhesives in North and Central America. Colquitt was appointed to his current position in 2003. He is a graduate of the University of Georgia with a B.S. in Economics.