April 21, 2008
Prime cuts | Berwick-based Prime Tanning merges with a major Chinese leather company
After nearly a century of weathering the vicissitudes of fickle markets and changing times, Prime Tanning has not only persevered, but also grown to be one of the largest leather makers in the world. The tannery recently announced it is merging with a company in Shanghai to nearly triple its production capacity, and company officials say the move will put Prime at the front of the premium leather industry. "It's something to hang your hat on," says Michael Kaplan, Prime Tanning's co-chairman who, along with his brother Stephen, took over the family-owned business in 2003.
The merger with Shanghai Richina Leather Co. Ltd. will give Prime Tanning, which now processes 55 million sq. ft. of leather in Maine, an additional capacity to finish about 95 million sq. ft. year. The company's Shanghai plant employs about 2,000 and generates $130 million in revenues a year, according to Richina Leather CEO Roger Wang. In its North American facilities, Prime Tanning employs 470 and makes $250 million in annual revenues, which includes its sales of so-called "wet blue" ˆ or cleaned hides ˆ and finished leather.
The merger with Shanghai Richina is a significant step for the company, which has been making dramatic acquisitions in the past year. Prime bought two competitors, Irving Tanning in Hartland and Cudahy Tanning Co. in Wisconsin, and is in the process of shutting Cudahy down and laying off 90 workers there to consolidate operations in Maine. Now the company is setting its sights on the international market, and the leap into China will push Prime closer to its goal of increasing sales abroad.
The company is not divulging many details about the merger. The name of the combined company will be Prime Leather International and led by Prime's current chief executive officer, Robert Moore.
Michael Kaplan is straightforward about the merger's intention. "I think generally it's to survive and grow," he says. "It's like the old adage says, if you don't grow you're not going to make it."
Chief Financial Officer Grover Elliott says the merger will allow Prime to more easily branch into large overseas markets such as China and India. Along with partnering with Shanghai Richina, Prime is also working with two tanneries in India and Vietnam to increase capacity. Currently, only 35% of Prime's finished leather is sold internationally.
The new company will come together in three phases. The first step involves merging the management and marketing and sales teams. The second piece will be to legally combine the two companies, and the third phase, which will happen next year, will be to list the new company, called Prime Leather International, on an Asian stock exchange. "The combined company would be large enough so we could list ourselves on the exchange and take advantage of equity financing," Elliott says.
Shanghai Richina is currently owned by Richina Pacific Ltd., a company headquartered in Malaysia with substantial holdings in China and listed on New Zealand's stock exchange.
Survival of the fittest
Prime Tanning's success is in large part due to fortitude and stubbornness, family qualities that have passed down from the company's founder, Morris Kaplan, to his grandsons who oversee the business today.
"It is because of the family that we've been successful and others haven't been," says Elliott ˆ an outsider to the Kaplan family and recent hire at the firm. "It's that stick-with-it-ness."
Morris Kaplan, a Russian immigrant who arrived in the United States with only $40, started the business in 1921 when he bought a tannery in Woburn, Mass., producing patent leather for shoes. To be closer to Maine's hub of shoemakers, Kaplan in 1935 expanded to Berwick, where Prime is headquartered today.
After Morris Kaplan died in 1947, his son Leonard took over and built up the company. But in 2001, Leonard Kaplan considered shutting down the business in a cutthroat environment. Michael Kaplan, however, credits his father with the tenacity to hang on during hard times while making strategic long-term decisions.
"My father was an old-fashioned business man with a great sense of the future," he says. For instance, in 1972, Leonard bought a plant in St. Joseph, Mo., to clean and prepare raw hides ˆ called "wet blues" ˆ for Prime's Maine facilities to finish and dye them. According to Elliott, the St. Joseph plant is the largest "blueing" tannery in the United States today, selling 150 million pounds of hides a year to an undisclosed number of factories around the world.
Elliott says in the late 1990s, the industry was struggling because too many tanneries choked the market. At that point, it was either be swallowed up by another company or do the swallowing. "In 2001, you still had a number of tanneries fighting for business," Elliott says.
Around that time, the company was challenged by rising costs, government regulations, international competition and changing fashion trends. Michael Kaplan says back in 2001, he supported his father's determination to carry on, partly for selfish reasons.
"I was too old to become a doctor," he says with a grin. Plus, he adds, the company had an obligation to its workers and to Maine to make the business work.
And just seven years later, the company's management is foreseeing the feasibility of reaching the ultimate goal of making $1 billion a year. "We think we can do it," Elliott says.
The merger with Shanghai Richina Leather Co. Ltd. will give Prime Tanning, which now processes 55 million sq. ft. of leather in Maine, an additional capacity to finish about 95 million sq. ft. year. The company's Shanghai plant employs about 2,000 and generates $130 million in revenues a year, according to Richina Leather CEO Roger Wang. In its North American facilities, Prime Tanning employs 470 and makes $250 million in annual revenues, which includes its sales of so-called "wet blue" ˆ or cleaned hides ˆ and finished leather.
The merger with Shanghai Richina is a significant step for the company, which has been making dramatic acquisitions in the past year. Prime bought two competitors, Irving Tanning in Hartland and Cudahy Tanning Co. in Wisconsin, and is in the process of shutting Cudahy down and laying off 90 workers there to consolidate operations in Maine. Now the company is setting its sights on the international market, and the leap into China will push Prime closer to its goal of increasing sales abroad.
The company is not divulging many details about the merger. The name of the combined company will be Prime Leather International and led by Prime's current chief executive officer, Robert Moore.
Michael Kaplan is straightforward about the merger's intention. "I think generally it's to survive and grow," he says. "It's like the old adage says, if you don't grow you're not going to make it."
Chief Financial Officer Grover Elliott says the merger will allow Prime to more easily branch into large overseas markets such as China and India. Along with partnering with Shanghai Richina, Prime is also working with two tanneries in India and Vietnam to increase capacity. Currently, only 35% of Prime's finished leather is sold internationally.
The new company will come together in three phases. The first step involves merging the management and marketing and sales teams. The second piece will be to legally combine the two companies, and the third phase, which will happen next year, will be to list the new company, called Prime Leather International, on an Asian stock exchange. "The combined company would be large enough so we could list ourselves on the exchange and take advantage of equity financing," Elliott says.
Shanghai Richina is currently owned by Richina Pacific Ltd., a company headquartered in Malaysia with substantial holdings in China and listed on New Zealand's stock exchange.
Survival of the fittest
Prime Tanning's success is in large part due to fortitude and stubbornness, family qualities that have passed down from the company's founder, Morris Kaplan, to his grandsons who oversee the business today.
"It is because of the family that we've been successful and others haven't been," says Elliott ˆ an outsider to the Kaplan family and recent hire at the firm. "It's that stick-with-it-ness."
Morris Kaplan, a Russian immigrant who arrived in the United States with only $40, started the business in 1921 when he bought a tannery in Woburn, Mass., producing patent leather for shoes. To be closer to Maine's hub of shoemakers, Kaplan in 1935 expanded to Berwick, where Prime is headquartered today.
After Morris Kaplan died in 1947, his son Leonard took over and built up the company. But in 2001, Leonard Kaplan considered shutting down the business in a cutthroat environment. Michael Kaplan, however, credits his father with the tenacity to hang on during hard times while making strategic long-term decisions.
"My father was an old-fashioned business man with a great sense of the future," he says. For instance, in 1972, Leonard bought a plant in St. Joseph, Mo., to clean and prepare raw hides ˆ called "wet blues" ˆ for Prime's Maine facilities to finish and dye them. According to Elliott, the St. Joseph plant is the largest "blueing" tannery in the United States today, selling 150 million pounds of hides a year to an undisclosed number of factories around the world.
Elliott says in the late 1990s, the industry was struggling because too many tanneries choked the market. At that point, it was either be swallowed up by another company or do the swallowing. "In 2001, you still had a number of tanneries fighting for business," Elliott says.
Around that time, the company was challenged by rising costs, government regulations, international competition and changing fashion trends. Michael Kaplan says back in 2001, he supported his father's determination to carry on, partly for selfish reasons.
"I was too old to become a doctor," he says with a grin. Plus, he adds, the company had an obligation to its workers and to Maine to make the business work.
And just seven years later, the company's management is foreseeing the feasibility of reaching the ultimate goal of making $1 billion a year. "We think we can do it," Elliott says.
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