Bloomberg News

Oerlikon to Expand Plane Coatings in U.S. Without Sulzer Tie-Up

July 10, 2013

OC Oerlikon Corp. (OERL) and Sulzer AG (SUN), which both have Viktor Vekselberg as their largest shareholder, are making independent forays into metal coatings for airplane parts, the head of Oerlikon’s coating business said.

Oerlikon, based in Pfaeffikon, near Zurich, is looking to build facilities in Asia and the U.S. to be near to Airbus SAS and Boeing Co. (BA:US) suppliers as it promotes its own range of physical vapour deposition or PVD coatings for landing gear and other parts, Hans Braendle said in a telephone interview.

The Swiss company has pledged to pump “substantial” funds into expanding an aerospace-coatings business, matching the expansion plans of Sulzer located 31 miles away across Zurich. While Vekselberg’s Renova investment vehicle has said that cooperation between the companies is conceivable, Oerlikon is looking to go it alone, Braendle said. Japan’s IHI Corp. (7013) snapped up Swiss PVD-coatings maker Ionbond last year.

The two operations are complimentary so far, “so theres no need” for a tie up, Braendle said.

Sulzer, which is 31 percent owned by Vekselberg, is putting above average research funding into its Metco coatings unit compared to the group, said divisional head Cesar Montenegro in an April 9 interview.

Airbus Parts

Airbus, owned by European Aeronautic, Defence & Space Co., is phasing out the use of hard chromium coatings in exchange for lighter, more environmentally-friendly PVD sprays which are 50 times thinner than a human hair and harder than steel, Braendle said. The coatings are used on fasteners for flaps or rudders, and in critical parts of the landing gear, he said.

“France is the starting point: we are targeting Asia, China and also the U.S,” Braendle said, adding that Oerlikon will soon announce a new coating center in the Wichita area.

The investments show how Oerlikon is trying to build out its most profitable unit after a restructuring which included selling a lower-margin textile machinery unit for $495 million.

“One of the reasons Oerlikon is looking at aerospace is because it’s a market with above average margins,” Braendle said.

A possible merger of Sulzer and Oerlikon, or of their coating units, has been the subject of industry speculation since Russian billionaire Vekselberg, the world’s 53rd-richest man, started investing in both manufacturers through his Renova group of companies. Spokespeople for Renova, Sulzer, and Oerlikon declined to comment on speculation about a merger.

Sulzer’s Metco coatings unit had sales of 690 million francs ($712 million) last year while Oerlikon’s coating unit had sales of 501 million francs. Renova owns 48 percent of Oerlikon and 31 percent of Sulzer. Renova has also made a takeover offer for Schmolz + Bickenbach AG (STLN), a Swiss steelmaker.

“These kinds of decisions have nothing to do with investors or shareholders but are purely driven by the demands and the business rationale of the unit,” Oerlikon spokesman Burkhard Boendel said.

To contact the reporter on this story: Patrick Winters in Zurich at pwinters3@bloomberg.net

To contact the editor responsible for this story: Simon Thiel at sthiel1@bloomberg.net


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