Hephaestus Holdings Inc., the parent company of Kyklos Bearing International has acquired FormTech Industries, LLC in a prepackaged deal taking FormTech out of Chapter 11 bankruptcy (5251R9N7 filings website).

The acquisition makes HHI the largest privately-held forged parts producer serving the North American automotive industry. In addition, KBI can now better integrate its supply chain for wheel bearing hub assembly forgings.

HHI was created in 2005 by KPS Capital Partners, acquiring and consolidating several companies: Jernberg Forge, Iron Mountain Forge, Impact Forge, Omni Forge, and Net Forge. HHI acquired Delphi's Sandusky bearing manufacturing plant in mid-2008, renaming it Kyklos Bearing International. KBI is the largest supplier of wheel bearing hub assembly units to the North American auto industry.

FormTech had filed chapter 11 bankruptcy protection in August, financed by $8.5 million in D-I-P loans secured by HHI. HHI had acquired voting control of FormTech's senior secure debt prior to the filing.

FormTech has a somewhat convoluted and troubled history, tracking the auto industry's boom and bust, but tracing its most recent roots to MascoTech.

In January 2001, Metaldyne was formed with Heartland Industrial Partners acquired MascoTech for $2 billion, adding Simpson Industries for $350 million, and aluminum die caster Global Metal Technologies. The group was combined and renamed Metaldyne, with 9,000 employees working in 50 plants across 11 nations.

Metaldyne ran into financial difficulties, and in March 2006, FormTech acquired Metaldyne's North American forging operations. The acquisition made FormTech into North America's largest privately-held producer of forgings for the auto industry; other markets included heavy duty truck and industrial equipment. FormTech manufactured bearing races, wheel bearing hub assembly forgings, transmission and transfer case gears and shafts, ring gears, clutch housings and similar components.

FormTech had approximately 1,000 workers spread across 6 facilities in the US upper midwest -- Royal Oak, Detroit, Fraser, and Troy, Michigan; Ft. Wayne, Indiana; and Minerva, Ohio; and sales of approximately $350 million per year.

In December 2008, FormTech and American Axle and Manufacturing struck a unique asset-swap deal. FormTech traded its Ft. Wayne differential gear factory to AAM for some cash and its Tonawanda, New York forging plant. AAM renamed the Ft. Wayne plant as AccuGear, and FormTech whittled down the Tonawanda facility -- which had previously been slated to close -- to just four presses producing wheel bearing hub and spindle forgings.

But FormTech continued to struggle in the weak North American auto industry, found little outside interest in its operations and was eventually forced into the prepackaged Chapter 11 arrangement with HHI.

FormTech President, Chris Jones, said: "We believe that FormTech's assets have a great future under HHI, one of the world's best-capitalized forging companies, backed by a private equity fund with more than $2 billion of capital. The combination with a strategic buyer that is the leading company in the North American forging industry will lead to significant synergies. HHI's CEO knows our Company well, as he ran and helped build many of our plants in a previous position. We are grateful for the support and confidence being given to us by HHI and KPS, including providing our DIP financing."

George Thanopoulos, HHI's CEO, said: "With the acquisition of FormTech, HHI now offers the broadest array of forging processes in the industry and has the largest collection of horizontal hot formers worldwide."

FormTech's plants coming under HHI are:

Royal Oak, MI - wheel hubs, spindles, rolled rings, transmission gears, differential gears
Fraser, MI - forged shafts, differential side gears, pinion gears
Detroit, MI - differential gears, FWD components, wrist pins, suspension sockets, combustion plates, end caps
Troy, MI - transmission shafts, various shotpeened, heat-treated, and coated components
Minerva, OH - pinion gears, pinion shafts, wheel spindles
Tonawanda, NY - hub and spindle forgings

HHI admits it is taking a calculated risk, consolidating the North American automotive forging industry. The company said it is looking forward to other acquisition opportunities, while extending sales efforts into Europe and Asia, leveraging the customer base and manufacturing assets.

The North American forging industry has been suffering in this recession, best evidenced by Forging's 2009 census of North American forging operations, here:

A few weeks ago, HHI lost out in its stalking-horse bid to acquire what remained of Metaldyne's North American forging operations.

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