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FASTENER HISTORY

February 17, 1982 FIN – Raymark Corp., the new company formed by the merger of Hi-Shear and Raybestos, may or may not be the largest fastener manufacturer in the U.S. – but if not it is right up there.

Frederick J. Ross, who will be president and CEO of the new company as he was for Raybestos-Manhattan Inc., thinks it will be the biggest with about 5% of the overall U.S. fastener market.

Others in the industry think SPS Technologies might be bigger and don’t know where the U.S. portion of Canada’s Automotive Hardware, which bought Russell Birdsall & Ward, which in turn bought the fastener business of Lamson & Sessions, would stand against the fastener portion of Raymark.

Raymark as a whole would have projected sales of more than $500 million a year. The boards of the two companies have agreed to the merger and it is subject to approval by stockholders in their separate meetings in April and May. The value of the merger, based on recent stock prices, would be about $74.9 million.
One share of Raymark common stock will be issued for each of Hi-Shear Industries, Inc.’s 4.6 million outstanding shares and one share of Raymark convertible preferred stock will be exchanged for each of the about 1.9 million Raybestos shares not now owned by Hi-Shear.
Hi-Shear already had a 30.4% stake in Raybestos.
Raybestos shareholders would control about 34% of the new company.

Other officers of the new company will be David A. Wingate, now chairman and president of Hi-Shear, who would become chairman of Raymark; and William S. Simpson, chairman of Raybestos, who would become vice chairman of the new company.

Hi-Shear is a leading factor in aerospace fasteners and also makes industrial piping products.
Raybestos, through its Modulus and Milford operations, is a major factor in industrial fasteners, along with its traditional business in automotive brake linings and other asbestos products.

The RM Formed Products headquarters, the umbrella Raybestos set up over the four Milford divisions and the Modulus Division, will move.
The president of RM Formed Products, Ed Baich, had set the headquarters up in Louisville, KY, but will now be moved to Trumbull. Hi-Shear operations will be headquartered there as well.

The merger will end a dance as intricate as an 18th century minuet, that the two companies have danced with assorted partners since 1980. But you have to go back to the 1960s to really follow it.
In about 1968 Tom Friveley bought Screw & Bolt from the Berkman family and changed the name to Modulus. Around 1974 or 1975 he sold Modulus to A.V.C. Corp. As the fastener industry moved out of its shortage period, Modulus began having some difficulties – although the problems were not all necessarily the fault of the fastener business.
A.V.C. had an unprofitable television station, WPHL-TV in Providence, R.I., and some knitting mills in the South, which were not doing well. These drained money away from the fastener operation.
About this time, in around 1977 or 1978, Frank H. Reichel Jr., a medical doctor who was chairman of A.V.C. agreed to a personal request by William Simpson, the president of Raybestos. Simpson wanted to retire, but he regarded Raybestos somewhat as he would his family and was anxious to have someone he regarded a “nice guy” – Reichel, take over.
To do so, however, A.V.C. would need help. It enlisted the Budd Co., Philadelphia maker of mass transit equipment to help it buy Raybestos shares. Unfortunately, the purchase of Budd by the West German steel maker Thyssen ended this attempt although A.V.C. did get a controlling interest in Raybestos.

Then, along came Hi-Shear. It was attracted to Raybestos.
Seeing what A.V.C. had 7.1% of Raybestos and an option to buy another 14% as the result of the friendly agreement between Reichel and Simpson, Hi-Shear decided that the way to get Raybestos was by going for A.V.C.
In September 1980, Hi-Shear said it would pay $20 million in cash and stock for A.V.C. Corp.

Meanwhile, however, Simpson had hired Fred Ross to be president of Raybestos. Ross, who had just been squeezed out at Carborundum when Kennecott took over that company, had no stomach for going through that kind of experience again.
Raybestos began bidding against Hi-Shear for A.V.C. By November 1980 Hi-Shear was offering $30 a share for A.V.C. stock, which had been trading for $21.25 a share when the bidding war had begun.
Both sides saw that things were getting out of hand and reached an agreement: Raybestos would be allowed to buy A.V.C. and Hi-Shear would be allowed to name two directors – Wingate and Frank Bloom, executive vice president, to the Raybestos board (Also Ross has been on the Hi-Shear board for the past year). Raybestos was able to buy A.V.C. for less than it and Hi-Shear had been offering.

Then Hi-Shear made a bid to buy Raybestos stock directly, achieving a 30.4% stake in the company, despite the fight Raybestos continued to put up.
Why the hange of heart toward the end of 1981 and the beginning of this year? No one outside is quite sure. Ross had joined Raybestos with the intention of making it a $5 billion conglomorrate within five years.
Possibly, he saw the formation of Raymark as a way – maybe the only way – to accomplish this.
The fact that Ross is president and CEO of the new company is probably significant.

During 1981 the old A.V.C. operation was streamlined. The TV station and at the knitting mills were sold, and all that remains of A.V.C. is Modulus. Even two Modulus divisions were let go: Precision Formed Products, Farmington, Mich., and Modform Northfield, in Northfield, Ohio, were sold. Modform Northfield is now called Boltform.

An effort to decrease labor costs at Modulus plants is moving along through all of this.
Last September the union agreed to a three-year wage freeze, and on February 15 the final language, some of the work rules and so on were ratified. Customers who were nervous about what was happening at Modulus feel encouraged.

What further reorganization, relocation and consolidation will take place among Raymark’s fastener possibility would be consolidation within operations remains to be seen. The Mt. Pleasant, PA, Modulus plant, is fairly modern and has a lot of unused space for machinery.

At the same time as the merger was announced, Raybestos reported earnings of about $3 million, or $1.16 a share in 1981, a sharp turnaround from a net loss of $6.3 million in 1980. Sales in 1981 were up 24% from 1980’s $274.4 million to 1981’s $342.5 million.

Hi-Shear reports revenues for the quarter ended November 30, 1981, at $26.8 million, up from $23.1 million a year earlier. Net income for the quarter was $2.2 million – $046 a share, compared with $2.6 million, or $0.55 per share, a year ago. For the six months ended November 30, revenues were $56.6 million, up from $46.2 million and net income was $5.5 million, $1.13 per share, up from $5.2 million, $1.17 per share, a year earlier. ©1982/2009 Fastener Industry News.
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