Industry has mixed reaction to Sun Capital’s pending Vitro America acquisition

By Katy Devlin, Glass Magazine
June 7, 2011
COMMERCIAL, FABRICATION : BUSINESS

In the past 18 months, Sun Capital Partners, Boca Raton, Fla., has become a major player in the glass industry, purchasing Arch Aluminum & Glass, Tamarac, Fla., in February 2010, acquiring United Glass Corp., Louisville, Ky., in April, and outbidding Grey Mountain Partners for Vitro America, Memphis, last week, via its American Glass Enterprises subsidiary.

The winning bid was approximately $61 million, a substantial increase over the original $44 million price. Sun Capital must close the sale by June 17, 2011, or Grey Mountain, the back-up bidder, can step back in. The sale is now awaiting court approval.

Industry response to the auction results has been mixed, with several representatives saying consolidation is an expected result of the current market. Others fear the consolidation could lead to higher prices and less competition.

"We were not surprised to see this consolidation and expected the 'great recession' would alter the industry landscape," says Kelly Schuller, senior vice president, sales and marketing, Viracon, Owatonna, Minn.

Mike Moderson, Dearco Distributors in Shawno, Wis., agrees. "This is the way the market is. Everything is turned upside-down on volume, and factories aren't running at 100 percent. ... The bigger companies are getting bigger. There are other companies that are floundering, and there will likely be other downfalls."

Mark Dawson, president, Glass Doctor, Waco, Texas, says this consolidation could be beneficial to his company and possibly the industry. "Anytime we see consolidation in our marketplace, we think it's a good thing for Glass Doctor overall," Dawson says. "We feel like we've done a great job of building our brand. We have positioned ourselves to be a market leader when it comes to full-service glass. We have a long-term strategy, so no matter what happens, it is business as usual. The industry needs a good national flat glass vendor; hopefully, they will step up to fill that void."

Schuller adds, "We view the combination of Arch, UGC and Vitro as a development that will aid in stabilizing and strengthening the industry going forward."

Brad Pruitt, vice president of operations, Capital City Glass Inc., Lawrenceville, Ga., says the consolidated company could create necessary competition in some areas. Additionally, "Since they are buying companies that are in trouble, consolidating locations and personnel, they are creating a better company," Pruitt says. "I think there will be a lot of good that comes out of this."

The flip side

In other regions, however, the consolidation means a loss of competition, particularly in the Southeast, where Arch and Vitro are the major players. Bill Evans, owner of Evans Glass Co., Nashville, says Sun's purchase of Vitro America could be detrimental to glass shops. "They will have an essential monopoly on this region," Evans says. "They will control flat sheet, tempered, and insulating glass supply and distribution. They could influence aluminum extrusion pricing to small glass shops. ... In this time of struggle, to emerge from the economic downtown, we are now faced with potentially a more frightening situation. In a recession, a company can downsize personnel and streamline operations. I am not aware of measures a glass shop owner can take to counter a supply chain monopoly," Evans says.

While Rick Churchill, owner, B & B Glass, Dallas, thinks the purchase is a positive for Vitro America and beneficial locally, he is also concerned about a lack of competition. "Overall, I think it's a positive move for Vitro America to be separated from its parent. But, with Sun Capital buying such a large group of companies, and Oldcastle [BuildingEnvelope] buying up independent companies as well, it's a little bit concerning. We need some diversity in the market."

Several industry representatives expressed concern over how Vitro America will change under new ownership. Moderson says to be successful, Sun Capital should keep current Vitro personnel in place and to not try to recoup their investment too quickly. "They might start releasing key people at Vitro, start shaving delivery and upping prices," he says. "However, if they leave the people in place that they have now, we will continue to enjoy and do business as is."