BY MIKE BOYER
The Cincinnati Enquirer
It's been just a week since Unova Inc. announced plans to buy Cincinnati Milacron Inc.'s machine tool business, but John Grove says some of Milacron competitors already are worried.
Mr. Grove, co-owner of Tipton Machinery Co. in Sharonville, is one of Milacron's largest machine tool distributors. Distributors like Mr. Grove, who handle sales and service for a variety of machine tool builders, are on the front lines of the $30 billion worldwide market for machines that cut and form metal.
Mr. Grove expects Unova to sell a high-speed horizontal machining center produced by its Michigan-based Lamb Technicon unit -- a machine that Milacron doesn't now offer -- through Milacron's network of more than 30 national distributors.
"I hear some of Milacron's competitors are concerned," he said.
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A NEW LOOK
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A look at Beverly Hills-based Unova Inc. after the acquisition of Cincinnati Milacron's machine tool business, to be known as Cincinnati Machine, part of Unova's industrial automation systems business:
Revenues: Expected to approach $2.5 billion, up from $1.5 billion last year.
Business: Industrial automation systems and automated data systems such as bar-coding equipment made by Intermec Technologies Corp., which has a plant in Fairfield.
Employees: 9,500 worldwide, including about 1,900 in Greater Cincinnati.
Chairman: Alton Brann, chief executive officer.
History: Spun off in October from Western Atlas Inc., an industrial products and oil drilling equipment manufacturer which itself was spun off in 1994 from Litton Industries Inc.
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Such cross-selling opportunities, as well as acquiring Milacron's network of more than 30 machine tool distributors, were among the reasons cited by Unova in announcing Aug. 21 that it was purchasing Milacron's Oakley-based machine tool business for $178 million.
Marrying Unova's industrial automation systems business, heavily oriented to motor vehicle manufacturing, with Milacron's machine tool operations, which have traditionally focused on aerospace manufacturers and small, metal-working job shops, will create a $1.4 billion juggernaut, the largest machine tool company in the United States and the second- or third-largest in the world, depending on who is counting.
German conglomerate Thyssen AG, which bought Wisconsin-based Giddings & Lewis last year, and Japanese-based Yamazaki Mazak, whose U.S. operations are based in Florence, are the two other largest machine tool builders, with sales of about $1.5 billion and $1.3 billion, respectively, experts estimate.
"To have a U.S. company in there (among the top three) is kind of refreshing," industry analyst Alexander Paris Sr. said. The number of U.S. machine tool builders has shrunk dramatically in the last few decades in the face of stiff competition from overseas.
Mr. Grove echoes the sentiments of industry analysts and Milacron and Unova executives when he says the sale, expected to be completed in October, "will be good for the people of Milacron, for its distributors and its customers."
Although machine tools have been at the heart of Cincinnati Milacron's business since the company's formation as Cincinnati Milling Machine Co. in 1884, it has been obvious that the company's heart hasn't been in machine tools for most of this decade.
Milacron has dramatically restructured its machine tool business -- consolidating into plants in Oakley and Birmingham, England, products that were previously made in six locations and revamping its product line. Machine tools last year accounted for just 11 percent of the company's $127 million in operating earnings and 24 percent of its $1.9 billion in revenues.
By contrast, Mr. Grove said, "Unova wants to be in the machine tool business."
As other recent acquisitions such as Dillard's purchase of Fairfield-based Mercantile Stores and Daimler-Benz AG's purchase of Chrysler Corp. have shown, Mr. Grove said, "To be successful in business today, you've got to be focused on what you do best."
And Alton J. Brann, Unova's 56-year-old chairman and chief executive officer, has had plenty of experience focusing businesses. Mr. Brann, a native of Portland, Maine, who holds a mathematics degree from the University of Massachusetts, rose through the ranks as a systems engineer at defense conglomerate Litton Industries Inc. to become chief executive in 1992.
He subsequently led the spinoff of Litton's oil-field services and industrial products businesses into Western Atlas Inc. in 1994 and last year led the spinoff of Unova from Western Atlas.
Although the machine tool industry is a mature industry, Mr. Brann said in an interview after the Milacron announcement that he thinks that there opportunities for growth.
"We're excited about the opportunity we see," he said indicating that Unova would continue to evaluate other machine tool acquisitions.
Unova's industrial automation systems business, which had sales of $800 million last year, includes Lamb Technicon, a Michigan-based maker of metal cutting machines mainly for the automotive market, and Landis Gardner, a Waynesboro, Pa.-based maker of precision grinding equipment.
Although Milacron's machine tool business is Unova's largest acquisition so far, the company has also acquired Goldcrown Machinery, a Hebron manufacturer of grinding equipment, and R&B Machine Tool Co., a Saline, Mich., manufacturer of small machining centers in the last year.
About 26 percent of Milacron's machine tool sales are with aerospace companies, a market that accounts for only about 10 percent of Unova's current machine tool sales.
"We have virtually no presence in the aerospace industry, so this acquisition will take a lot of the cyclicality out of our automotive business," he said.
Mr. Brann said Unova's financial targets are to generate sales growth of 15 percent to 20 percent annually and operating earnings growth "better than that."
