McKechnie plc
Address:
Leighswood Rd.
Aldridge Walsall
West Midlands WS9 8DS
United Kingdom
Telephone: (+44) 1922 743887
Fax: (+44) 1922 451045
http://www.mckechnie.co.uk
Statistics:
Public Company
Incorporated: 1915 as McKechnie Brothers Limited
Employees: 1,346
Sales: £525.6 million (US$788 million) (1999)
Stock Exchanges: London OTC
Ticker Symbol: MKNE
NAIC: 339999 All Other Miscellaneous Manufacturing; 33429 Other Communications Equipment Manufacturing
Company Perspectives:
In 1997, McKechnie was a diversified international engineering group. Since then, we have intensified our focus on higher margin, high value added engineering activities with a global footprint, resulting in the divestment of our low-margin commodity and regional businesses. Today we are clearly focused on our core markets. The business is being transformed. Our strategy means that: We concentrate on building partnerships with blue-chip customers; We apply our considerable engineering skills to design and build components that provide 'least cost not lowest price' solutions; We focus on growth areas within robust markets&mdashærospace, automotive, telecommunications, IT and retail materials handling; Our operations are divided broadly equally between North America and Europe--where there is customer appetite for our engineering skills.
Key Dates:
1871: Duncan McKechnie opens scrap metal smelting factory in St. Helens.
1891: Sons Alexander and Daniel take over factory's operations; new factory opens in Widnes.
1915: Business incorporates as McKechnie Brothers Limited and begins selling chemical byproducts from smelting process.
1953: Completes public offering.
1971: McKechnie family loses control of company.
1981: Acquisition of Ever Ready Tool & Engineering.
1984: Name changes to McKechnie plc.
1996: MVC is acquired, representing entry into U.S. automotive market.
1998: Plastic blow molded packaging operations are sold.
1999: Consumer Goods division is sold to Newell Rubbermaid; Western Sky Industries is acquired.
Company History:
Once nicknamed 'Widget plc'--because of its myriad of low-margin, high-volume commodity products, such as the plastic fittings that make bottled beer taste like draft beer--McKechnie plc has reinvented itself as an international specialist engineering and plastics group. Since the end of the 1990s, McKechnie has divested the large majority of its low-margin products, including its entire consumer products division, to focus on high-margin components for several key markets: Aerospace, Automotive, Mobile Telecommunications, and Retail Materials Handling. The company's Specialist Products division, which included subsidiaries Arger Enterprises and Valley Todeco in the United States, Linread Northbridge in the United Kingdom, and Dzus in Germany and France, designs and manufactures component products for the automotive and aerospace industries, with an emphasis on the company's core fasteners expertise. Specialist products also include components for the mobile telephone and portable computer markets, with major clients such as Nokia and Compaq including the company's fasteners in their product designs. While the company's Engineered Plastics division continues to churn out widgets for Guinness and other bottled beer manufacturers, this division has increasingly specialized in high-margin products, such as returnable plastic container systems, surgical implants, including components for pacemakers, wheel trim and molding, hubcaps, components for braking systems and other automotive components, and components for missiles and other military applications. In October 1999, McKechnie sold off its Consumer Products division, which included such brand names as Harrison Drape, Spur, Douglas Kane, and Homelux, to U.S. giant Newell Rubbermaid for £83 million. That division represented some 20 percent of the company's 1999 sales of £525.6 million. More than half of the company's sales are generated by acquisitions completed between 1997 and 2000. The transformed McKechnie continues to seek opportunities to boost its strong market positions, announcing a war-chest of some £200 million for the start of the new century.
From Metal Smelter to Widget Maker in the 19th Century
Founder Duncan McKechnie opened his first factory--collecting, smelting and recycling scrap metals--in St. Helens in 1871. McKechnie was joined by sons Alexander and Daniel, who opened an additional factory in Widnes in 1891 and assumed the leadership of the family business. As the business grew, the brothers formalized their partnership as a limited company, McKechnie Brothers Limited, in 1915. By then, the company was already preparing to diversify. Recognizing the value of the chemical byproducts of the smelting process, McKechnie Brothers began collecting and separating these byproducts for sale.
The McKechnie family continued to control the company through the first half of the 20th century, expanding operations throughout the United Kingdom. At the end of World War II, McKechnie Brothers began to move onto the international stage, turning to a Europe devastated by the war and needing to rebuild, and to the United States, flush with victory and preparing to enter a new period of economic growth. The company also moved into the Australian and New Zealand markets. In order to fuel its own growth, McKechnie Brothers went public in 1953. The McKechnie family maintained its majority in the company's voting rights.
The newly buoyant marketplace in the United Kingdom and elsewhere gave McKechnie Brothers the impetus to move deeper into the manufacturing end, and the companies production activities gradually replaced its smelting operations. The company also recognized the transition of many products from metal and other materials to plastics. McKechnie Brothers too joined this trend, adding plastics in the 1960s. The company also moved into the consumer products market during this time.
While McKechnie Brothers' diversification effort proved successful, the McKechnie family itself was losing its majority status among the company's shareholders. The conversion of a portion of ordinary shares into shares with voting rights spelled the end of the McKechnie family's control in 1971. The company's new shareholder base encouraged the continued diversification of McKechnie Brother's product line, which also began to see a stronger engineering component. Among the company's products of the time were heat-resistant materials, using ceramics and fiberglass, needed to replace the huge installed base of asbestos, which by the late 1970s had been recognized as exceedingly dangerous and the use of which had been placed on tight restrictions.
Selling a minority share in its McKechnie Refractory Fibres subsidiary enabled McKechnie Brothers to open into new territory, with the acquisition of Ever Ready Tool & Engineering in 1981. The company moved more steadily into engineering products during the 1980s. In 1984, the company dropped the 'Brothers' from its name, adopting the name McKechnie plc.
Transformation into Engineering Specialist in the 1990s
Through the 1980s McKechnie continued to boost its engineering component. In 1986, the company added the manufacture of fasteners--later to become a core product--with the acquisition of PSM International. The following year, McKechnie boosted its plastics operations with the purchase of Precision Molded Plastics and Trent Valley Plastics.
These acquisitions were joined by McCourtney Plastics one year later. Consumer goods were also taking on a prominent role, as the company added such products as curtain components and extended into the booming do-it-yourself (DIY) market with such brands as Harrison Drape, Spur, Nenplas, Douglas Kane, and Windoware. The move into DIY coincided with the downturn in the housing market and the entry into the lengthy recession of the 1990s. In the early 1990s, the company also added DIY manufacturer Savage, for £47 million, a move designed to enable the company to profit from the slow recovery of the housing market in the United Kingdom.
The company also added to its plastics capacity with the purchase of a majority share of Charter Supply Corporation in the United States, adding that company's packaging and containers products in 1989. The company's containers were to become a key product category for the company, especially among the United Kingdom's large supermarket chains. McKechnie began designing custom-engineered container systems for such chains as Marks & Spencers, Great Mills, and Asda, replacing traditional cardboard containers.
Entering the 1990s, McKechnie began to focus its direction beyond its diversified operations to new product areas, including the automotive and aerospace industries. The company moved into automobile components in 1989 with the purchase of Conex Union BV of the Netherlands, which added that company's extruded plastic hoses and other products. The Conex acquisition was joined by those of Barrington Products and Injection Moulded Plastics, increasing McKechnie's automotive components capacity in the U.K. and European markets. Injection-molded plastics were quickly to become an important growth area in the automotive industry, as automakers sought means to decrease the weight of vehicles--in part to help meet tightening pollution restrictions--and the costs of vehicle production.
After the automobile market, McKechnie took the leap into the aerospace industry. In 1994, the company made its first aerospace industry acquisition, of Linread plc and its trading name of Linread Northridge. That purchase, which, in particular, gave the company a place among suppliers to the European aerospace consortium Airbus, was quickly followed by the acquisition of Valley Todeco, which enabled the company to enter the aerospace market in the United States.
In the mid-1990s, McKechnie began to step up the growth of its automotive and aerospace production. In 1996, the company formed its Motor Vehicle Components USA division for acquisitions of businesses including Thompson International, adding wheel trims and hubcaps. Plastics-based wheel trim became something of a company specialty in the late 1990s, as car manufacturers began replacing traditionally metal-based hubcaps with plastics. In the late 1990s, also, McKechnie began increasing its market position in another area of the automotive market, that of fuel- and fluid-handling systems, for such manufacturers as Ford, Daimler-Chrysler, and General Motors.
The design and engineering of fasteners--with applications ranging from door latches for military aircraft to hinges for mobile telephones&mdashøok on a greater share of the company's turnover and profits in the 1990s, particularly with the acquisition of fastener specialist Dzus in 1996, which added that company's latching systems and quarter-turn fasteners. By then, however, the heavily diversified McKechnie had begun to face criticism--particularly among stock market analysts--for its lack of product focus. With the company's share price slipping (and with the increasing shareholder's position of insurance industry giant Prudential, which had acquired nearly 20 percent of McKechnie's stock by the late 1990s), the company's then-CEO Michael Ost found himself under pressure. In 1997, Ost resigned, replaced by Andrew Walker.
Walker immediately led McKechnie on a massive restructuring program, seeking to transform the company from a diversified manufacturer of primarily low-margin, high-volume commodity items to a highly specialized engineering and plastics group with the emphasis on the production of high-margin products. One of Walker's first moves was to sell off the company's blow-molded plastic packaging and products operations, a move taken in March 1998. Several months later, the company's entire holdings in low-margin, cyclical products in Australia and New Zealand were sold off, thereby exiting one of the company's oldest markets. The company's streamlining continued into 1999, when, in October of that year, McKechnie sold its entire Consumer Products division--which by then had been reduced to just 20 percent of sales&mdashø U.S.-based Newell Rubbermaid for £83 million.
That sale significantly changed McKechnie's profile. Entering the 21st century, McKechnie had now reorganized around its newly refocused Specialty Products and Engineered Plastics divisions. The company's focus had also turned more solidly to the aerospace industry--and particularly the aerospace aftermarket, less vulnerable to cyclical downswings. By the beginning of the year 2000, some 40 percent of McKechnie's sales were generated through the aerospace industry.
The company continued to enhance its aerospace operations with the acquisitions of PTM International Inc. of Miami, Florida, adding to the company's aerospace aftermarket penetration, and Western Sky Industries, the U.S.-based maker of bolts and fasteners, for US$260 million. These acquisitions helped to consolidate McKechnie's new strategic direction. They also pointed toward similar acquisitions in the near future: at the end of 1999, McKechnie announced its intention to spend up to £200 million on acquisitions in the next year.
Principal Subsidiaries: Arger Enterprises, Inc (U.S.A.); Burnett Polymer Engineering; DFS International, Inc (U.S.A.); Dzus Fasteners; Dzus Fasteners GmbH (Germany); Dzus France SA; Eachairn Investments SARL (Luxembourg) Fijaciones Industriales PSM SA (Spain); Hartwell Corporation (U.S.A.); Jesse Industries, Inc (U.S.A.); Linread plc; McKechnie Espana SA; McKechnie Nederland BV; McKechnie Plastic Components, Inc (U.S.A.); McKechnie Vehicle Components; McKechnie Vehicle Components North America, Inc (U.S.A.); PSM Fastener Corporation (U.S.A.); PSM Fixation SA (France); PSM International; PSM Metall-und-Kunststoff Verbindungssysteme (Germany); Valley Todeco, Inc (U.S.A.); Western Sky Industries (U.S.A.).
Principal Divisions: Specialist Products; Engineered Plastics; Consumer Products.
Principal Competitors: AlliedSignal Inc.; PMC Global; Arvin Industries, Inc.; Summa Industries; The BFGoodrich Company; Tenneco Automotive; Cooper Industries, Inc.; Triple S Plastics; Formosa Plastics Corporation; Tuscarora Inc.; General Electric Company; Wyman-Gordon Company; ITT Industries.
Further Reading:
Anderson, Simon, 'McKechnie Scoops US Bolt Maker,' Daily Telegraph,May 26, 1999.
Anderson, Simon, and Roberts, Dan, 'McKechnie Leads Share Fightback in Engineering, Daily Telegraph, October 7, 1998.
Larsen, Peter Thal, 'McKechnie's Widgets Resist the Slowdown,' Independent, October 7, 1998, p. 25.
Trefgarne, George, 'Hopes Rise at Refocused McKechnie,' Financial Times, January 22, 2000.
------, 'McKechnie Has £200m to Spend on Acquisitions,' Daily Telegraph, April 1, 1999.
------, 'McKechnie Makes US Acquisition,' Financial Times, May 26, 1999.
Source: International Directory of Company Histories, Vol. 34. St. James Press, 2000.
