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Brampton Brick bids to acquire Atlas Block

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In Springwater
Dec 2nd, 2013
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By Peter Criscione Brampton Guardian 

Brampton Brick says it is working to scoop up a concrete and masonry company that recently went into receivership. The deal could be worth up to $14 million and includes a state-of-the-art facility located in Simcoe County.

Over the weekend, Brampton Brick, Canada’s second largest manufacturer of clay brick, announced it has entered into an asset purchase agreement to acquire substantially all of the assets of Atlas Block.

The acquisition is being made from KPMG Inc., the court-appointed receiver of Atlas Block, and is subject to approval.

Brampton Brick says acquiring Atlas Block will add production capacity to its facilities and enable the local firm to “take advantage of cost-saving synergies by consolidating production of similar items resulting in greater economies of scale.”

The Atlas Block facility in the Simcoe County community of Hillsdale produces a large variety of concrete products, pavers and segmental retaining wall units.

According to Brampton Brick, the technology at Hillsdale will support its initiatives to expand its product portfolio and “better service its concrete landscape and masonry products customers.”

The aggregate purchase price is being pegged between $12 million and $14 million.

The purchase price and inventory will be financed via term bank debt.

Brampton Brick says it expects the transaction to wrap up on or about Jan. 6, 2014.

Atlas Block in receivership

By Sara Ross Orillia Packet & Times October 25, 2013

Atlas Block Co. Ltd. — a large family-owned business with strong ties to Orillia — has entered receivership. On Oct. 4, the Ontario Superior Court of Justice appointed KPMG Inc. as receiver and manager of the company.

“Standing up and telling the staff that the receivers were coming was one of the hardest things I’ve ever done in my life,” Laura Vaughn, the company’s president and owner, said Friday.

Atlas Block — which manufactures concrete products, landscaping products and brick and stone products — has locations in Hillsdale, Victor Harbour and Brockville.

Atlas Block employed 85 people prior to the receivership. It now employs 76. “On behalf of the owners and managers of the business, I am so sorry for every single person in this community whose job and livelihood is at risk because of where we are,” Vaughn said.

As receiver, KPMG LLP — a Canadian accounting firm — is running the company and looking for a buyer. The assets of Atlas Block will be up for bid on Nov. 7. This includes the manufacturing operations, inventory and equipment, real estate, intangible assets and Atlas’ interest, if any, in certain leased equipment, states the KPMG website.

“Our expectation is that we will find a willing buyer and that, I think most of the jobs will be preserved and the business will continue to operate,” Vaughn said. Vaughn hopes the winning bidder preserves the jobs and continues to run the business.

“This is a great business. It generates great profits,” she said. “We had a terrible balance sheet.” Many of the employees still live in Orillia and commute to Hillsdale for work, Vaughn said. “Job opportunities in these areas are not plentiful for any of our people so I would hate to see (them lose their jobs),” she said. Atlas Block owed the Royal Bank of Canada between $5.5 and $6 million.

The Toronto bank funded the company’s operating line; the manufacturing of inventory and working capital. The company’s debt is a result of the 2008 economic downturn, Vaughn said. Around this time, Atlas Block was planning an expansion of its company from Orillia to Hillsdale, located near Barrie.

“We were kind of at a place where we either needed to sell the business or invest in the business. We love what we do and that’s why we chose to invest,” Vaughn said. When the financial crisis hit, it was too late to stop. “We were just far enough along in our project that it didn’t really make sense to back out,” Vaughn said.

The company would have expanded in Orillia, but the property wasn’t big enough and there was no land of the required size available, Vaughn said. “Almost all staff from Orillia moved to Hillsdale,” she added. The Hillsdale planted opened in late 2010.

From 2010 to 2012 Atlas Block’s sales dropped. “Sales were not what they were when we started,” Vaughn said. Atlas Block began facing problems with its lenders. “The construction of the new plant meant that we had a lot of debt on our balance sheet and then the decline in sales meant that we had less cash flow to service that debt,” Vaughn said.

The Business Development Bank of Canada held the company’s long-term debt, including the development of the new plan. “They’ve been extremely co-operative, extremely patient,” Vaughn said. Atlas Block asked the Royal Bank of Canada to give them six months. “If you’re going to try to liquidate the business in order to get paid, don’t do it in the winter or the fall because we’re construction related, we’re a seasonal business,” Vaughn said.

The company’s inventory and business is at its highest value in the spring. “(We had) another plan that (minimized their risk) to keep them in for six months,” Vaughn said. KPMG changed the company’s locks on Oct. 4 and handed the owner’s the key. “It’s really unfortunate,” Vaughn said. “It did not need to be that way.”

The receiver had its staff on site every day in the first week and froze Atlas Block’s bank accounts. “In our case, because they believe the assets are of significant value, they are keeping the business running so that they can make a sale,” Vaughn said. KPMG terminated nine positions Oct. 22, but everyone else is still employed and receiving a paycheque.

Vaughn’s grandfather, Fred Larkins, began working for Atlas Block in 1965. He was the first member of the family to own Atlas Block. In 1978, Vaughn’s father, Don Gordon, joined the business. He is still the company’s CEO. Vaughn joined in 2006 and her husband, Mark, joined in 2007. “We’re a true family business,” Vaughn said. “I believe there is a legacy here and I don’t think it needs to be left in the dust.”

Asked if the company would still be alive if it weren’t for the economic downturn, Vaughn said, “I wish I knew the answer to that. I’ve asked myself that question many times.” Vaughn thanks her employees and said she will never forget how hard they’ve fought for the business. “Wherever (the business) goes, I will never ever forget the show of support and loyalty,” she said.

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