Uniroyal Technical Products - Reverse Merger With Some Very Positive Catalysts
Mar. 31, 2015 11:29 AM ET | About: Invisa, Inc. (INSA)
Summary
•Uniroyal Technical Products, Manufacturer of Naugahyde is Now a Publicly Traded Company.
•Financial Information Was Released in Their First 10k.
•Uniroyal Technical Products Has a Plan to Capture Global Dominance in a Fragmented Industry.
Uniroyal Engineered Products, a producer of coated fabrics, is temporarily a publicly traded company under the name Invisa Incorporated (OTCQB:INSA). INSA had been a listed stock and almost a shell company with very limited sales. By being acquired by INSA, Uniroyal became a publicly traded stock. Information about this transaction is contained in the 8K filing. The acquisition was completed in November and a 10k was filed today.
Howard Curd, Uniroyal Engineered Products' CEO plans to grow the company into a global entity by acquisition and to develop market leadership in a fragmented sector by cross selling products; gaining exposure for Uniroyal Engineered Products and its acquisitions to new OEMs. I spoke to Mr. Curd, and to Vic Allgeier, a spokesperson for INSA and was told that the upcoming 10k will state that the components of the new INSA had revenues of around $100 million for the prior year and a profit margin of about 10%. Mr. Curd said that he aims to change the name of the stock to Uniroyal Engineered Products sometime this year and outlined his plan.
Uniroyal Engineered Products is a producer of cast vinyl coated fabrics, including the iconic Naugahyde brand, providing solutions for the automotive, healthcare, hospitality, marine, recreational, furniture and transportation markets. The company is a piece of the Uniroyal Company started as the United States Rubber Co. in 1892. The Uniroyal tire business was acquired by Michelin in 1990. In 2003, Howard Curd bought Uniroyal Engineered Products, the remaining piece of the original company, which was trading for a fraction of a penny and under bankruptcy protection.
Curd successfully brought the company out of bankruptcy. Uniroyal Engineered Products remained a private company and entered the automotive sector in 2009, about the same time as the auto industry went into a tailspin. Uniroyal Engineered Products was not totally dependent on the automotive market, but what happened then was instrumental in expanding their products into the global market rather than just the U.S. market.
One of Uniroyal Engineered Product's largest customers was Ford (NYSE:F). Similarly to many other U.S. manufacturers, Ford was looking for cost cutting solutions and decided to implement just in time inventory from local suppliers on a global basis. Ford decided that each model car would be built with the same components, despite being built in different countries. They were looking for companies that were able to supply the same product to their manufacturing facilities in Europe, Asia and the U.S. on an as needed basis. Ford had a relationship with Uniroyal in the U.S. and in England with Wardles Storeys Limited, and suggested that the two companies discuss partnering up. The companies merged in 2013 and that merger created the spark for Uniroyal Engineered Product's growth strategy.
Uniroyal Engineered Product's sales were predominantly in the U.S. with 50% of revenues in the automotive industry. Wardle Storeys' sales were mostly in Europe with 80% of revenues in the automotive industry to customers including Range Rover, Fiat, Nissan and Jaguar. Uniroyal Engineered Products has benefited from the connection with Wardle and has secured a contract with Ford in Europe in the production of the Ford Escort as well as entry into the German automotive market. Since companies are now competing globally, entry into the German market means that the new Uniroyal Engineered Products expects to gain German automaker's business not only in Germany, but in the U.S as well. Entry into Europe is expected to also benefit Uniroyal's sales efforts in the healthcare, hospitality, marine, recreational, furniture and transportation markets
The Curd family made incremental purchases of INSA stock and once they had a controlling interest, engineered INSA's acquisition of Uniroyal Engineered Products which they also had a majority ownership position in, completed in November with the Curd family owning about 75% of the INSA shares after the transaction. There was no dilution of shares created by the INSA acquisition of Uniroyal Engineered Products. The Curd family received non convertible preferred shares bearing interest at around 5%.
The company expects that there will be at least one and maybe more acquisition this year funded by their lines of credit and that at some point in the not too distant future a secondary offering will be implemented to add shares to the float, allowing institutional investors to scoop up shares. Mr. Allgeier believes that microcap funds will begin taking an interest after the first 10k verifies what he has been reporting about this new stock.
The market for coated fabrics is highly fragmented and expected to continue to grow. The top six companies in the market had a combined share of only 26% of the overall market, which makes Mr. Curd's plan to grow by acquisition, to offer just in time supply internationally and to gain market exposure and market share by cross selling products a very logical conclusion. Due to the large stake that the Curd family owns, this stock will be a small floater which is subject to wider spreads and greater volatility than otherwise. Despite the inherent risks due to low volume, it is interesting to note that the Curd family has no immediate plans to sell shares. This is a ground floor entry point for investors who agree with this company's strategic plan.
