By Agnieszka Opalka
The Inca Group's combination with one of its largest competitors, Kingway Materials Handling Co., strengthens the combined company's presence in the rack manufacturing industry. An American Capital portfolio company since 1999, The Inca Group manufactures steel products for the construction, distribution, and manufacturing industries. Its combination with Kingway, a designer and manufacturer of storage, handling, and order selection systems for the material handling industry based in Acworth, GA, enables the resulting company to expand its product line, increase its customer base, and broaden its market presence in geographic markets previously not penetrated.
The Kingway combination closed on September 24, 2002. American Capital Strategies, Ltd. (Nasdaq: ACAS) provided $15 million in senior subordinated debt financing, along with additional financing from Fleet Capital.
"Our relationship with American Capital is critical to Inca's growth, allowing us to increase market share, enhance internal systems, and better serve our customers," said current Inca CEO David Rosenfield. "With the Kingway combination, Tony Stewart, the current President of Kingway, will assume responsibility for the operations of the combined companies as I assume the Chairman's role. This will help to speed the implementation of synergies between the two organizations while adding depth to our management team."
With a full product line and a broad geographic presence, the combination of Inca and Kingway results in the formation of the third largest rack manufacturer in the country. The combined company will be in a strong competitive position to service its material handling distributors and larger direct customers. Furthermore, Inca will be the only major rack manufacturer to have a substantial presence in each of the product categories.
"Inca's combination with Kingway will yield product, cost and geographic synergies," said American Capital Principal and Managing Director Gordon O'Brien. "These, along with the addition of strong management from Kingway, will likely increase the value of the combined companies and American Capital's own investment."
The Texas-based Inca Group consists of five companies: Inca Metal Products Corporation, a manufacturer of steel storage racks and shelving products; Dallas Tube and Rollform, Inc., a manufacturer of mechanical and structural steel tubing; Andes Metal Processors, Inc., a toll processor for large steel mill customers; Clymer Enterprises, a manufacturer of steel storage racks, particularly cantilever racks, and Clark Equipment, a manufacturer of agricultural equipment.
American Capital initially invested in Inca in September 1999 and acquired Clymer Enterprises, a manufacturer of industrial racks, in June 2000. This acquisition enabled Inca to improve its production capacity and expand its product line to give customers more product choices to better meet their needs.
Founded in 1962, Kingway, a division of Reunion Industries, Inc., designs and manufactures storage, handling, and order selection systems. Specifically, Kingway manufactures structural racks and roll formed racks, and sells accessory products such as wood floors and connectors. In addition, Kingway manufactures Computer-Assisted Picking Systems, or CAPS, which significantly increase the productivity of picking fast moving products in high volume assembly and packing operations. Prior to its current position, Kingway was a division of Kingston-Warren Corporation. In 1997, Kingway was acquired by an affiliate of Reunion and was consolidated with Auto-Lok, a manufacturer of roll-formed rack products, and continued operating under the Kingway name. Kingway's customers include well-known companies such as Wal-Mart, Kmart, Staples and L'Oreal.
The combination complements Inca's product line of rack systems. Inca will now have the opportunity to supply Kingway's products, especially CAPS, to its current customers. It also expands Inca's already well-established customer base by increasing the geographic reach that Inca currently has in the Central Southwestern region to areas in the East specifically marketed by Kingway. The companies' different geographic markets eliminate the risk of cannibalization of customers and increase the overall market share of the combined business. Together, this allows for profitable cross-selling opportunities through both companies' distribution channels.
The combination also allows Inca to expand its base and growth potential in the rack manufacturing industry. With new geographic markets and an increasing customer base, The Inca Group continues to grow and become a dominant player in the marketplace.
