Reichhold Sale

Dainippon Ink & Chemicals (DIC) will sell its Reichhold unit in a management buyout for the bargain-basement price of a dollar. DIC also will forgive $229 million of Reichhold's $431 million in outstanding debt. Of the remaining $202 million, DIC will recover $30.3 million on the day of the sale and slightly more than $171 million in three years.

Dainippon paid $540 million to acquire Reichhold in 1987. Since then, the Japanese company says it has cultivated extensive North American and European operations in polymers for coatings and composites. However, DIC says Reichhold's unfavorable results in recent years have prompted it to divest the unit.

Reichhold's sales in 2004 totaled $922 million at current exchange rates, but the unit had an operating loss of $29.1 million and a net loss of $308 million.

Reichhold will be headed by John S. Gaither, 61, who spent 32 years with the company--including as president of three different divisions, chief operating officer, and chairman of European operations--before leaving in 1998. Gaither returned to the firm in May 2004.

Gaither has assembled a team of former and current Reichhold veterans who are participating in the management buyout. "We believe we can make a difference that will enable Reichhold to live up to the potential we know it has," he says.

Phil G. Phillips, president of Chemark Consulting Group, says Reichhold now has strong and knowledgeable management. But, he adds, "the test of the viability of Reichhold's new strategy will be time, plus several other key elements." These include effectively passing along raw material costs on all products, but particularly coatings resins; providing value in service, fast product turnaround, and effective communications; focusing on the most valuable segments; and making the difficult decisions in account management and its own personnel.