Sequa Corp. - Company Profile, Information, Business Description, History, Background Information on Sequa Corp.

200 Park Avenue
New York, New York 10166

History of Sequa Corp.

Sequa Corporation is a diversified industrial company that produces a broad range of aerospace products, printing machinery, metal coatings, and specialty chemicals. Under its previous names General Printing Ink Corp. and Sun Chemical Corp., Sequa was the world's leading producer of printing inks and organic pigments before its graphic-arts unit was sold in 1986 and aerospace became the company's chief field of operations.

The General Printing Ink Corp. was organized in 1929 from the merger of five companies. These were George H. Morrill Co., established in 1840; Sigmund Ullman Co., established in 1861; Fuchs & Lang Manufacturing Co., established in 1871; Eagle Printing Ink Co., established in 1893; and American Printing Ink Co., established in 1897. The consolidated companies manufactured and distributed news, letterpress, lithographic-process and other printing inks, lithographic machinery and supplies, and related products. The eight principal factories owned by General Printing Ink included two in Chicago and one each in San Francisco and New York City, where the executive offices were also located. The five companies had combined net sales of $9.4 million and net income of $1.3 million in 1928.

According to an article in Chemical Week, General Printing Ink's constituent companies largely continued to compete with one another for sales rather than to cooperate and take steps to keep abreast of changing technology. Nevertheless, the amalgamated company made profits and paid dividends throughout the Great Depression of the 1930s. By 1940 it owned two more principal manufacturing plants, including one in Toronto that belonged to General Printing Ink Corp. of Canada, Ltd., a subsidiary organized in 1931. General Printing Ink had net income of $1 million in 1940 on sales of $10.6 million.

In 1945 the company was renamed the Sun Chemical Corp., reflecting its broadened range of interests. A number of companies were acquired--usually through an exchange of stock--and made subsidiaries during this period. These included: in 1945, E. J. Kelly Co., Michigan Research Laboratories, A. C. Horn Co., and Warwick Chemical Co.; in 1946, Hudson Paint & Varnish Co. and C. A. Willey Co.; and in 1947, Electro-Technical Products Co. and Number 113 East Centre Corp.

By 1950 Sun Chemical was divided into groups for graphic arts, paint, industrial finishes, and chemicals, and into divisions for pigments, electro-technical products, and overseas. In addition, the company had nine subsidiaries. Sun Chemical and its subsidiaries owned or leased 42 plants and facilities, including three in Canada. With these acquisitions, net sales climbed from $17.5 million in 1945 to $35.5 million in 1949. Net profit also increased during this period, from $770,000 to $1.5 million.

With 32 divisions and subsidiaries in 1954 and, in addition to its manufacturing plants, 30 warehouses and 60 sales offices, Sun Chemical was a sprawling giant difficult to keep under control. However, with the exception of a subsidiary that manufactured printing-machinery equipment, all used raw materials based on oil, resins, and pigments. During 1954 Sun consolidated its products and selling organizations into three groups: chemicals (principally waxes); graphic arts; and structural waterproofing, paints, and products finishing. A management committee was established in 1953 to administer corporate policy.

Norman Alexander was president of Ansbacher-Siegle Corp., a producer of organic pigments for inks, paints, plastics, and cosmetics, when he acquired control of Sun Chemical, becoming its president in 1957. The son of a spats manufacturer, Alexander directed the family garment business before amassing a fortune in other manufacturing interests, real estate, and movie distribution. After he took control of Sun, the company bought Ansbacher-Siegle. A lawsuit by Sun stockholders charged Alexander with profiteering by buying Ansbacher-Siegle for what they claimed was an unreasonably high price. The suit eventually was settled by a court-approved compromise.

When Alexander took over Sun Chemical it ranked second among U.S. printing-ink producers and increasingly was falling behind the leader, Interchemical Corp. Sales were stagnant, and management was paying out big dividends rather than setting aside money to modernize the company's aging factories. Net income sank from $2.1 million in 1955 to $1.1 million in 1958. One problem was that the business was overly decentralized; for example, there were 28 ink centers, each purchasing raw materials from its own sources, and the smaller operations especially were unable to keep up with technological changes. The Warwick Chemicals operation, however, became in the mid-1950s the first supplier of thermosetting resins for wash-and-wear white shirts.

During Alexander's first decade directing Sun Chemical, he sold off or dissolved more than a third of the company. He concentrated on expanding its ink-and-pigment operations, buying private companies in this field throughout the world. By the end of 1960 Sun Chemical held 15 wholly owned active subsidiaries, including two in Canada and one in Venezuela. It also had a majority or half interest in eight companies in Australia, England, France, Mexico, and the United States. The Graphic Arts Group made inks for all printing processes and machinery for graphic arts. The Packaging Materials Group made a variety of films, fabrics, tapes, coatings, and other materials. The Chemical Group produced pigments and paints, textile and paper chemicals, textile-printing colors, and color dispersions. In all, Sun Chemical and its subsidiaries owned or leased 60 plants.

In 1960 Sun Chemical established a corporate research program. Two years later, the staff moved into a building in Carlstadt, New Jersey. By 1966, when Sun was spending between 2.5 and 3 percent of its annual sales on research, the research center housed 90 scientists and technicians. Much of its effort was directed toward the ink operations, which had been consolidated with centralized purchasing. A major emphasis was on developing polyamide resins for flexographic inks and on developing inks for a prospective electrostatic textile-printing machine. Sun had become the first supplier of ink for new machines performing electrostatic printing on fruit and plywood.

Although graphic arts remained Sun's largest group, chemicals was the fastest growing in the mid-1960s, with sales doubling every three years. Sun was the world's leading supplier of resins for permanent-press systems. In 1963 it introduced its Permafresh 183 glyoxal-based resin for the Koratron permanent-press process and carbonate-type resins for white goods. These resins were made by the chemicals group, then sold to the graphic-arts group. The chemicals group's researchers also were developing water repellents and high-performance pigments for the automobile and plastics industries.

Sun's overseas operations grew in the late 1950s and early 1960s. By 1966 it had added joint ventures in Italy, Spain, and Japan to its international interests. A second Mexican factory, opened in 1965, was the largest ink plant in Latin America. A new Venezuelan ink factory replaced the existing one, and another ink plant opened in Colombia as a joint venture. In all, Sun Chemical recorded an increase in sales from $73.4 million in 1965 to $108.1 million in 1969, and an even more impressive gain in per-share earnings from $1.01 to $2.17.

Sun Chemical had sales of $121.9 million in 1971. About half that sum came from inks. The company also was diversifying into related businesses, especially peripheral printing equipment. In addition, it was the chief supplier of machines for imprinting labels on two-piece, seamless beverage and aerosol cans. At the end of 1972 Sun acquired Standard Kollsman Industries Inc., a manufacturer of automotive parts, optical and aviation instruments, and electronic components, in a transaction valued at about $10.3 million in common stock. This purchase, which concluded a protracted struggle for control of the company, formed the basis for the establishment of instrumentation and automotive groups within Sun Chemical and included Kollsman System-Tecknik GmbH, the company's German subsidiary.

The Standard Kollsman purchase helped boost Sun Chemical's net sales from $136.9 million in 1972 to $246.5 million in 1973, and its net income from $4.9 million to $7 million. Graphic-arts materials and equipment accounted for two-thirds of all sales in 1974, by which time a Graphic Systems Group had been added to the company's operations. This group manufactured cylindrical decorators, photocomposition machines, automatic newspaper-handling systems, and computerized text-editing systems, and it also distributed electronic color scanning and separation equipment.

By the mid-1970s the company's investment in Suncure, a newly developed instant drying, solventless, ultraviolet cured ink, was paying off. There were a number of economic advantages to this process and a major environmental one: no smoke or toxic hydrocarbon emissions. Enthusiastic investors bid Sun Chemical's stock from about $11 to $27 a share in 1976, one of the best performances on the New York Stock Exchange that year. The outlook was also good for Sun's pigments, used in printing inks, paintings and coatings, plastics, cosmetics, and textiles. Alexander sought to make the company the largest domestic pigment producer by 1983. A $30-million Sun manufacturing complex in Muskegon County, Michigan, was expected to be the world's largest facility solely devoted to the production of organic pigments.

The company's expansion continued throughout the late 1970s. Net sales grew from $337.5 million in 1977 to $468.7 million in 1979, and net income from $15.3 million to $24.5 million. New subsidiaries were established in Bermuda, Chile, and Panama. By 1980 Sun had become the world's leading producer of printer's inks. Alexander, who now owned 34 percent of the company (compared to about 20 percent in 1966), had acquired more than 20 companies since taking charge of Sun and was engaged in his biggest takeover scheme, a contest for control of Chromalloy American Corp., three times the size of Sun Chemical.

Chromalloy held more than 140 businesses at the time, including drilling muds for the oil industry, textiles and apparel, coatings for turbines and other metal products, and financial services. It also owned a barge line plying the Mississippi River and its tributaries. Sun Chemical purchased a 5.2-percent interest in Chromalloy in February 1979, increasing its share to 18 percent before the end of the year. Further purchases of stock in late 1981 and early 1982 increased its share to 36 percent, despite litigation by Chromalloy directors, and Alexander became its chief executive officer in mid-1982.

Sun Chemical found itself on the receiving end of a takeover bid in 1986. A Japanese company, Dainippon Ink and Chemicals, Inc. offered to buy Sun in April for $77 a share, or $600.6 million, then sweetened its offer in May to $85 a share, or $663 million. Alexander, although a long-time friend of Dainippon's president, rejected the bid and raised his own stake in Sun to nearly 47 percent. In August, however, he agreed to sell Sun's graphic-arts materials group to Dainippon for $550 million. At the time this group was accounting for 61 percent of Sun's total sales and 57 percent of its operating profit.

Dainippon's cash offer enabled Sun Chemical to purchase the outstanding 56 percent of Chromalloy's shares for about $267 million in a 1986 stock swap and merge it into the parent company. It also made possible a cash offer for all the outstanding shares of Atlantic Research Corp., a producer of solid-propellant rocket motors and gas generators for short-to-intermediate tactical missiles like the shoulder-fired Stinger and the Tomahawk cruise missile. Sun already held an 18.6 percent stake in the company. After initial resistance, Atlantic Research in December 1987 accepted a sweetened offer of $31 a share&mdashout 2.7 times book value and totaling about $307 million.

With the acquisition of Chromalloy and Atlantic Research, Sun was not so much a producer of chemicals as of military hardware; the company's name was changed to the Sequa Corp. to reflect this change in focus. Its acquisitions enabled net sales to rise from $371.4 million in 1986 to $1 billion in 1987. In 1990 Sequa's net sales reached a peak of almost $2 billion, but thereafter military cutbacks resulting from the end of the Cold War devastated the company's balance sheet. Sales dropped from $1.9 billion in 1991 to $1.4 billion in 1994, and the company was in the red all four years, with the deficit increasing from $6.6 million in 1991 to nearly $64 million in 1993 before falling to $25.8 million in 1994.

Not all the drop-off in sales was due to military cutbacks. In August 1991 Sequa announced it was discontinuing six business units that had combined sales of $145 million during the first six months of the year. These included Valley Line Co., an inland barge transportation business; Sabine Towing & Transportation Co., a tanker and tank-barge firm; Sequa Engineered Services, producer of oil-well equipment and pump parts; and Sequa Capital Corp., a leasing and financial-services company. CSX Corp. bought Valley Line, which owned and operated 912 barges and 29 tow boats. The sale of Sabine was completed in 1992 for $36 million. In January 1994 Sequa sold ARC Professional Services Group to Computer Sciences Corp. for more than $64 million.

Sequa's woeful 1993 performance was partly due to an eight-week-long suspension of operations mandated by the Federal Aviation Administration at its Chromalloy Gas Turbine Corp. unit in Orangeburg, New York. A federal investigation of the work done in this plant for the repair of jet-engine parts led to the suspension and a $5 million fine. Sequa reported a loss of $18.5 million for the second quarter of 1993 and suspended dividend payments for the foreseeable future. Its common stock, which traded as high as $85 in 1990, dipped as low as $18 that year. In August 1994 the company announced that Chromalloy Gas Turbine again was profitable. Sequa sold three Gas Turbine units in 1994 for net cash proceeds of $57.2 million.

Aerospace was Sequa's leading business segment in 1994. Gas Turbine, the company's largest operating unit, accounted for 42 percent of all sales and revenues that year. This unit was a leader in the development and use of advanced metallurgical and other processes to manufacture, repair, and coat blades, vanes, and other components of gas-turbine engines used for military and commercial jet aircraft and for other industrial purposes.

ARC Propulsion, a supplier of solid-rocket-fuel propulsion systems since 1949, accounted for ten percent of 1994 sales and revenues. This unit was a leading developer and manufacturer of advanced rocket-propulsion systems, gas generators, and auxiliary rockets. Besides propulsion systems for tactical weapons, the unit was producing small liquid-fueled rocket engines for a number of space satellite systems worldwide. The Kollsman division was supplying electro-optical and electronic systems for military weapons and was designing and manufacturing aircraft instruments and related test equipment.

Machinery and metal coatings accounted for 15 percent of the company's business in 1993. Precoat Metals, the largest Sequa unit in this business segment, was a leader in the application of protective coatings to continuous steel and aluminum coil. The Can Machinery unit included Rutherford, the world's leading manufacturer of equipment to coat and decorate two-piece beverage cans. Europe-based Materiels Equipements Graphiques was supplying equipment for web-offset printing presses.

The chief operation in the specialty-chemicals segment was Warwick International, which accounted for 12 percent of Sequa's sales and revenues in 1994. Warwick was a leading producer and supplier of TAED, a bleach activator for European powdered laundry-detergent products. Sequa Chemicals was manufacturing high-quality performance-enhancing chemicals used in the textile and graphic-arts industries. Other Sequa units were Casco Products, manufacturer of automotive cigarette lighters, power outlets, and electronic sensing devices; Northern Can Systems, manufacturer of easy-open steel lids for cans; Kollsman Manufacturing Co., Inc., a subsidiary that produced medical diagnostic instrumentation; and Centor, a real-estate holding company owning and operating, among other properties, the 18-story Chromalloy Plaza Building in Clayton, Missouri.

In 1994 Chromalloy Gas Turbine Corp. was operating more than 50 plants in 13 states and six foreign countries, of which about half were owned and the remainder leased. ARC's chief installations were two leased manufacturing plants in Gainesville, Virginia, and Camden, Arkansas. Kollsman's properties included two plants in New Hampshire and one in Wichita, Kansas. Precoat Metals owned five manufacturing facilities in Missouri, Illinois, and Mississippi. Sequa's specialty chemicals segment owned a plant in Chester, South Carolina, and two in Great Britain.

In the mid-1990s Norman E. Alexander was approaching his 40th year at the helm of the company. He was also its principal stockholder. At the end of 1992 Alexander owned 35.8 percent of Sequa's stock and controlled 49.1 percent of its voting power. Sequa's long-term debt was $590.6 million in mid-1994.

Principal Subsidiaries: Atlantic Research Corp.; Casco Products Corp.; The Centor Co.; Chromalloy Gas Turbine Corp.; Kollsman Manufacturing Co.; Northern Can Systems, Inc.; Sequa Chemicals, Inc.; Warwick International Ltd.

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Further Reference

Bernstein, Peter W., "Norman Alexander Just Won't Go Away," Fortune, January 28, 1980, pp. 82--85, 87."Clinic Tightens Family Ties," Business Week, May 15, 1954, pp. 136, 138--140."Holders Clear Merger of Sun Chemical Corp. and Standard Kollsman," Wall Street Journal, January 2, 1973, p. 36.Irving, John, "Sun Projects 6--8 Percent Growth for Pigments," Journal of Commerce, September 27, 1978, pp. 3, 5.Kiesche, Elizabeth S., "Sequa's Cabrey: The Art of the Sale," Chemical Week, July 4--11, 1990, pp. 50, 52.Meier, Barry, "Sun Chemical Will Sell Group for $550 Million," Wall Street Journal, August 19, 1986, p. 13.Scott, Robert D., Jr., "Sun Chemical Corporation," Wall Street Transcript, May 29, 1972, pp. 28620--21."Sun Begins to Shine," Chemical Week, July 9, 1966, pp. 33--34, 36, 38, 40, 42, 44.Tanzer, Andrew, "With Friends Like These," Forbes, June 30, 1986, pp. 31--32.Wyatt, Edward A., "Speaking of Dividends," Barron's, August 16, 1993, p. 46.

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