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Balda shifts work in US as it undergoes ownership change

Join Date: 2018-11-21

Photo by Roger Renstrom Balda C. Brewer Inc. CEO Christoph Klaus and Sales Director Jeanne Brindle at the firm's soon-to-be-occupied Ontario, Calif., facility.

Amid ownership issues and new litigation, Balda of Bad Oeynhausen, Germany, is investing significantly for new equipment, physical improvements and relocations in its Southern California operations.

“We are excited about the developments and have had good growth in the last year,” said Christoph Klaus, CEO of the firm’s Balda C. Brewer unit.

For the fiscal year ended June 30, Balda AG reported total sales in its American operations of €47.9m ($53m) vs. €38.7m ($52.2m) for the previous year.

Balda is in the process of consolidating four California manufacturing sites into two, in Ontario and Oceanside, with improved capabilities.

“These changes are all parts of our growth strategy,” Klaus said. “We will achieve economies of scale and economics of scope. We might take two to three years to fill up the huge factory [in Ontario], but it is all part of a clear strategic picture.”

Production in Ontario should begin in mid-2016.

In the ownership arena, a decision is pending on a change for control of parent company Balda AG. But, according to Klaus, the change should not impact the California plans.

Balda shareholders recently approved a deal to sell the company to Heitkamp & Thumann of Düsseldorf, Germany, for €74m, but Balda management and its supervisory board have held off on final acceptance, pending a possibly higher bid from another suitor.

In a late move, pharmaceutical-sector supplier Stevanato Group of Piombino Dese, Italy, submitted a non-binding bid of €80m for all Balda operations. Balda has given Stevanato until 14 December to decide on whether to make a binding bid.

Meanwhile, Balda is still dealing with legal issues with the previous owner of the Balda operations in California.

Balda bought the US plants in 2013 from the Brewer family, including brothers Chuck Brewer III and Michael Brewer, who were CEO and chief operating officer, respectively. They were terminated in January 2015 after a dispute about a $5m bonus they expected to receive from the sale.

On 16 November, five Brewer family members and a related trust filed a lawsuit in a Santa Ana, California, court seeking $5m in damages from a range of Balda entities and individuals.

“The Brewers have never been through a merger or acquisition before,” said their lawyer, Rod Pacheco. “All of this is new for them, and they are being defrauded.”

The Brewer filing includes a 46-page complaint that lists 16 claims including breach of contract, intentional and negligent misrepresentation, fraudulent concealment and financial elder abuse.

The Superior Court of Orange County assigned the case to Judge Randall Sherman, who on 25 November issued a temporary restraining order that required Balda to post a $5m bond. Sherman scheduled hearings on a possible preliminary injunction 17 December and a proposed motion to compel arbitration 28 January.

The Brewers believe any Balda sale could move the company’s funds outside their legal reach in the United States and require them to pursue remedies in a more-difficult-to-access jurisdiction in a European court.

Of note, the new external sign at the Ontario facility says “Balda” prominently and omits any mention of the “C. Brewer” identity.

Balda C. Brewer aims to evolve into a complete medical device manufacturer.

Balda will handle clean room work in its newly leased space in Ontario and non-clean room activities about 75 miles away in an existing 55,000-square-foot facility in Oceanside. That location formerly operated as HK Plastics Engineering.

In Ontario, contractors are realigning a wall, painting surfaces, reflooring and installing signage and upgrades throughout most of the 138,000-square-foot plant.

As appropriate, the new occupant will use some infrastructure from the previous tenant, CareFusion Corp. Medical technology giant Becton, Dickinson & Co. acquired CareFusion on 17 March.

Balda C. Brewer committed in August to a long-term Ontario lease and plans initially to use about 65% of the space.

Two Class 8 clean rooms each measuring 22,300 square feet will connect directly to respective assembly areas, each of 2,640 square feet. One of those assembly areas will get Class 7 certification.

Offices will occupy 12,200 square feet and the finished-goods warehouse 22,700 square feet.

A bay for assembly projects occupies 24,000 square feet, and another bay of 26,000 square feet will remain vacant for now.

“We will take over manufacturing jobs for research and expand into assembly of health care, diagnostic and medical devices and drug delivery systems,” Klaus said during a 20 November visit to the plant.

Production in the upgraded Ontario facility will begin in mid-2016.

“Once the transition is completed, we will have more than 60 injection moulding machines in Ontario and more than 30 in Oceanside,” Klaus said.

Balda C. Brewer will vacate three leased California sites.

The first closing will occur by end of March with Balda exiting 60,000 square feet in Irvine. Eyewear-related production in Irvine will move to Oceanside.

Next, Balda will leave a 40,000-square-foot plant in Anaheim.

Finally, around October, Balda will move from a 20,000-square-foot Ontario building that is immediately adjacent to the plant now being improved.

Balda C. Brewer has one team of employees working on requalification of moulds and as many as 2,000 stock keeping units and another team dealing with the machine relocations. Moving a production site has potential risks and opportunities, Klaus noted. If there is a need to requalify a mould, a customer may want to move the work to another plastics processor rather than pay Balda C. Brewer for the requalification. “There is a low risk about loss of work,” he said.

Ontario will have an area for tool maintenance repair and some mould modification work and space for an automation group with software programming duties.

Balda C. Brewer has about 100 new tools in the pipeline from its in-house shop in Oceanside and several US mould makers in California, the Midwest and the East, depending on requirements.

Balda C. Brewer procures moulds for eyewear products in China. That niche is troublesome.

Balda C. Brewer is losing ongoing injection moulding work for its largest optical customer, which is insourcing its production and winding down its involvement with Balda. Industry sources speculate that the customer is fashion eyewear maker Luxottica Group of Milan, owner of sunglass maker Oakley of Foothill Ranch, California.

In its annual report, Balda AG touts the Balda C. Brewer work with another optics user. New York-based funoogles is a start-up supplying sunglasses and corrective glasses for children.

Balda C. Brewer assisted funoogles in mould development in 2014 and started production of the brand’s products in California during 2015’s second quarter.

Balda C. Brewer moulds the frames using Grilamid TR90 nylon 12 resin from the Grivory business of EMS-Chemie Holding of Herrliberg, Switzerland, and procures lenses of polycarbonate.

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