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In the News: Constant Comprehensive Communication and Education/Long-Term Objectives/More Than 100 Millionaires
August 20, 2007 It’s time for another installment of ESOPs In the News. If you are looking for more ESOP stories, here are some links to previous “In the News” blog posts: In The News: Sharing Ownership and Creating a Market / Producing a Competitive Advantage / Leaving a Legacy More ESOPs in the News In The News
Ulteig Engineering (Fargo, ND) Power to the people tells the story of 350 employee engineering firm Ulteig Engineering. The article identifies communication as one of the key challenges: “Marlys Meier, chair of ESOP communications committee with Ulteig and in charge of accounting at Ulteig Bismarck office, said not only is initial communication necessary, but constant comprehensive communication and education is vital.…So the communications committee organized brown bag lunches and other educational efforts. Through those, Olson said, the "light comes on."…As well as educating their employees, the board and trust committee members are still educating themselves.” The article states that of the 104 members of the Minnesota/Dakotas Chapter of the ESOP Association, 97% are privately held and the average company has 159 employees. The article also discusses growth and production of ESOP companies compares to their non-ESOP counterparts: “Companies that have employee ownership grow about 2 percent to 3 percent better than without it, he said. Combined with a degree of employee involvement in day-to-day activities, that production increases to 6 percent to 11 percent over non-employee-owned companies.
Ultimately, the goal of a company changing to an ESOP model is to get the workers to start thinking like owners, said Olson with Ulteig Engineers. It's an attitude of "we're all in this together,"Olson said.” Northwest Aluminum Specialties (The Dalles, OR) NW Specialties celebrates independence discusses Northwest Aluminum Specialties and how “the employees bought the Specialties business from the debtholders who took over the larger Golden Northwest Aluminum Holding Company following its 2004 bankruptcy.” It discusses how they started working with their Bank on April 18 and closed by May 30. The financing allowed them to pay off the hedge fund obligations and “provided a comfortable line of credit that would allow the company to expand its operation, buy new equipment, and hire more people. That could include expanded foreign trade.” The article ended by emphasizing one of the most important benefits of an ESOP: “Now we can focus on longer term objectives and run the business in a more efficient manner.” ChemTreat Inc. (Glen Allen, VA) We learn about Virginia -based ChemTreat Inc. in Buyout enriches workers. The ESOP owned 85% of ChemTreat, a maker of water-treatment products, at the time it accepted a $435 million cash buyout offer from Danaher Corp. The acquisition price averages out to more than $600,000 per each of the 600 employees: “ChemTreat executives said more than 100 employees will get contributions of $1 million or more to their retirement. Others will get hundreds of thousands of dollars, likely to be worth millions by the time they retire. The deal terminates ChemTreat's ESOP, but it is one example of how employee ownership plans are supposed to benefit workers.” The article described the original ESOP transactions as follows: “The ESOP was carried out in three stages, with employees acquiring an initial 30 percent of the company in 1989. They increased their ownership to 50 percent in 1995 and 85 percent in 2000. Tyler and Simmons together retained 15 percent ownership. The ESOP was financed through bank loans that the company paid back over a period of years, while issuing shares to employees as part of their retirement plans.” The following pros and cons at the time of the acquisition were also discussed: - “ChemTreat doubled its business during the time it was an ESOP."
- Due to the stage that the ESOP was in, it “couldn't issue shares to new employees until other workers retired.”
- The Company also had to be careful about taking risks such as acquisitions.
- “ChemTreat accepted the Danaher offer because it provided employee-owners with a good price for their shares.”
- “"It was also attractive to us because we will be allowed to operate as a stand-alone company," Nygren said. "ChemTreat will maintain its identity. Not one person gets laid off or displaced" and the company can expand more aggressively as part of Danaher."
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