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1987 FIN – Japanese Firm Partially Acquires ELCO

November 5, 1987 FIN – A Japanese company has purchased a substantial share of one of this country’s largest fastener manufacturers. Elco Industries Inc., Rockford, Illinois, on October 30, announced that approximately 11% of its outstanding stock has been purchased by Okabe Co. Ltd., a Tokyo-based company. Elco Industries, Inc., which has been around since 1922 when it was founded as Elco Tool & Screw Corp. in Rockford, Illinois, is now of the largest independent fastener manufacturers in the country and is a major supplier of fasteners and other components to the domestic auto industry. Okabe’s purchase of Elco’s stock, according to Elco, is for investment purposes and not to obtain control of the company.
Okabe’s interest in Elco, however, apparently encompasses more than just acquiring an equity in the company.
Jack W. Packard, president and chief executive officer, told Fastener Industry News that Okabe approached Elco several months ago about exploring business opportunities including a joint venture. Several alternative business arrangements, he stated, have been discussed with Okabe, but no agreements have been reached as yet.
Okabe, according to the Elco announcement, manufactures fasteners and related products for the construction industry, is a supplier of fastener for the automotive and original equipment market, and has business relationships with several automobile manufacturers (not identified) who are establishing manufacturing plants in the U.S.
FIN obtained a copy of the 38-page Form 13D filed by Okabe with the Securities Exchange Commission (SEC) and what follows is excerpted from that filing.
According to Form 13D (filed jointly by Okabe Company Ltd. Okabe Company, Inc., Multinational Business Services, Inc. and Akira Okabe Company Ltd.) Okabe Company Ltd., beginning on October 16, 1987, purchased on the open market 265,000 shares (or 10.98% of the common shares) of Elco Industries at prices per share ranging from $24.50 to $26/75, for a total investment of $7,002,125.
It should be noted that while Okabe purchased only 3,000 shares of Elco’s stock before Monday, October 19 (“Black Monday”) and the remaining 262,000 shares on or after October 19, it apparently didn’t get the stock at bargain basement prices.
Elco’s stock, in fact, has held up well during the recent stock market turmoil and, as of November 2, was selling for 24 3/8 just a little below its 52 week high of 26-3/4. In the 13D filing Okobe Co. Ltd., describes itself as a diversified industrial company with principal activities as a trading company and producer of fasteners. Okabe Co. Inc. located at 175 Liverly Blvd. in Elk Grove Village, Illinois, of which Okabe Co. Ltd. is the parent company, is identified as a company engaged in the importing and sales of fasteners. Okabe Co. Ltd. and Elco, according to the 13D filing, have in the past engaged in negotiations regarding a) the possible licensing by Okabe Co. Ltd. to Elco of certain proprietary technology of Okabe Co. Ltd., relating to the design and manufacture of certain fasteners b) possible granting by Elco Industries to Okabe co. Ltd., or its affiliates, of certain marketing rights to certain fasteners manufactured or to be manufactured by Elco and c) the possible granting by Okabe Co. Ltd. or its affiliates to Elco of certain marketing rights to certain fasteners.
As of October 27, according to the 13D filing, there is an understanding between Okabe Co. Ltd. and Elco pursuant to which Okabe Co. Ltd. has licensed certain technology to Elco Industries in order to enable Elco to bid on a contract to manufacture fasteners for a U.S. affiliate of a Japanese automobile manufacturer (which is not identified).
FIN was told by a number of people who are familiar with the Japanese fastener industry that Okabe Co. Ltd. (which is a publicly-traded company) is not a major factor in the Japanese fastener industry and that the company is more in construction fasteners than automotive fasteners. The president of Okabe Co. Ltd, is Akira Okabe. Koji Higuchi is executive managing director, Yosuke Nakazaki is managing director of sales, Satojji Nakajima is managing director of material and production, and Shonosuke Ishizaki is sales manager.
Akira Okabe is chairman of Akira co. Inc. of Elk Grove Village, Kename (Ken) Ohno is president, and Robert W. Neal is sales manager. Multinational Business Services Inc. (MBS), one of the joint filers of the schedule 13D is described in the filing as Washington, D.C. based company whose principal business is regulatory and trade counseling. It’s headed by Brion R. Sasaki, executive director. The Elko product line falls into three major groups: industrial (specialty fasteners, cold-headed metal components, precision metal stampings and precisions metal parts); consumer (screws, nails, do-it-yourself packaged hobby wire, and picture hanging wire) and construction (self drilling fasteners, anchoring systems for securing brick or block veneer to building walls, stampings for the metal building industry and architectural sealants and adhesives). In fiscal year 1987 (ended June, 30, 1987) the company had net sales of $127,989,000 (up 2% over 1986’s $125,668,000) and a net income of 4,010,000 or $1.71 per share (down 21% from 1986’s $5,070,000 or $2.17 per share).
Industrial products accounted for $93,850,000 of sales, consumer products for $20,638,000, and construction products $13,501,000.
For the first quarter of fiscal 1987 the company showed a big improvement in net income. The company had sales of $32,159,000 (compared with the year earlier quarter sales of $30,052,000) and net income was $1,655,000 or 70 cents per share for the year earlier quarter. Elco’s sales to the automotive industry (its two major customer being Ford, followed by GM) has increased significantly in recent years. In 1983 Elco’s sales to the automotive industry were $4.03 per domestic auto produced and in 1987 the figure stood at $8.75 per car.
At present, the company which has about 1,500 employees, has manufacturing and/or warehousing facilities (totaling about 1.1 million sq ft) in Rockford, Illinois, Logansport and Mishawaka, Indiana and Goodlettsville, Tennessee.
Elco’s management team is a well seasoned one, with the following four executives averaging about 25 years of service with the company. The president and chief executive officer of Elco Industries, Inc. is Jack W. Packard, 60, who’s been with the company for 37 years. Frank A. Fiorenza, 54, senior vice president and chief financial officer has been with the company for 28 years. Derek M. Hasse, 56, vice president-administration, has been with the company for 15 years, and Kenneth L. Heal, 44, ha
s been with the company for 19 years. ©1987/2009 Fastener Industry News.
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