Vanguard, a manufacturer of plastic piping for plumbing and radiant heat, and its sister company Midtec were sold late last year to Viega NA, a 100-year-old German company that ships plumbing and heating products worldwide. The deal joins Vanguard and Midtec's operational expertise with Viega's financial resources, providing Viega with a channel through which to extend its North American reach. What's more, the merger may reflect a growing migration within the industry from the use of copper plumbing pipe to plastic water distribution systems.
Vanguard and Midtec, based in McPherson, Kan., produce patented systems based on a flexible piping material called cross-linked polyethylene (PEX) and MANABLOC, a plumbing system that runs dedicated hot and cold water lines to each fixture. The benefit of the sophisticated manifold is that homeowners avoid, say, getting scalded in the shower when water is turned on elsewhere in the house; moreover, there is no loss of pressure in such instances.
Jason Ficken, managing director for Headwaters MB, the Denver investment banking firm that facilitated the sale, says the system uses 15 to 20 percent less energy than traditional copper-based models and is more durable. The PEX piping is less expensive to install, too, because it can bend around corners, eliminating the time-consuming cut-and-solder process that rigid copper and CPVC require. “It's a water distribution system, not just plastic pipe replacing copper,” Ficken says. “The real value of the proposition is that copper and labor costs are at an all-time high, and when builders can lower both of those variables, with no drop-off in quality, they'll go for that. Trained plumbers can do the job in one-third of the time, and they don't get called back to fix leaks as often.”
The acquisition will step up the exposure of a product that until now has been selling primarily by word of mouth. Ficken says that in 2004, the latest numbers available, copper piping dominated 60 percent of the U.S. market, but over the last decade the use of PEX ticked up from 5 percent to 27 percent, with CPVC and other materials representing 13 percent of market share.
With the acquisition positioning PEX for growth, get ready for penetration to accelerate, says Ficken. Founded in 1976, “Vanguard really knows how to extrude pipe and develop proprietary technologies that improve the consumer's life, but they haven't had time to focus on educating the public on their products. A company like Viega can eliminate the financial constraints and start extolling the benefits of PEX.”
The privately owned Viega employs 2,000 people and manufactures more than 15,000 products in its four large factories in Germany. According to Ficken, Vanguard's distribution infrastructure will not change. “A number of products manufactured in Europe can now be handled in McPherson, and there's the potential for building additional factory capacity,” he says.
SOURCE: WWW.TOOLBASE.ORG; PATH TECHNOLOGY INVENTORY 2001
