Sheffield Pays $16 Million for Two Aerospace Suppliers

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The aerospace industry may be in a decline, but it’s far from moribund.

Sheffield Manufacturing Inc., a Los Angeles precision machining products maker, announced late last month the $16 million acquisition of a pair of longtime aerospace suppliers.


In an effort to increase its customer base and product lines, the company bought Her-mach Machine Inc., a 52-year-old Torrance manufacturer of machine parts and assemblies, and Fortune Manufacturing Inc., a 29-year-old Chino component parts maker for military and commercial aircraft.


“We share many of the same customers and we will now be in a position to better service our aerospace customers across a broad line of products made by Sheffield, Hermach and Fortune,” Sheffield President Margarita DeWitt said in a statement.


The acquisitions speak to a larger trend of consolidation in the aerospace industry that has been going on for a number of years among both large manufacturers and smaller suppliers, said Leib Orlanski, a partner with Kirkpatrick & Lockhart Preston Gates Ellis LLP, which represented Sheffield in the acquisitions.


“You’ve got only one major airframe manufacturer left in the United States,” Orlanski said. “All you have in the United States is Boeing and all you have in Europe is Airbus.”


Now, smaller manufacturers are consolidating as well, Orlanski said, as shown by the Sheffield acquisitions and another set of rollups he is working on in Arizona.


Sheffield was started in 1951 and provides precision machining, sheet metal and welding services. Its primary customers include Boeing Co. and Northrop Grumman Corp.



Offshore Growth

Consolidation is not the only trend afoot in the aerospace world. Outsourcing has been and continues to be a popular option for local manufacturers looking to cut costs.


Ducommun Inc., a 158-year-old Carson-based aerospace supplier, just announced that it has established a new manufacturing facility in Guaymas, Mexico. The announcement comes about a year after the company opened a similar facility in Saraburi, Thailand.


“The focus was to shift labor-intensive production to a lower-cost region to help stave off price increases in the United States,” said Michael Lewis, an analyst with BB & T; Capital Markets. “The trend in the global aerospace industry is toward outsourcing these labor intensive portions of the contracts to lower cost areas of the world.”


Lewis said it is unclear what impact the moves will have on local manufacturing operations, but he is not forecasting significant layoffs.


The Mexican facility, which was established under the Ducommun AeroStructures subsidiary name, will be used for the production of structural components and subassemblies of commercial aircraft. Production is expected to start at the facility in the fourth quarter.



Hot Steel

The steel industry is surging and at least one local company is looking to benefit.


Reliance Steel & Aluminum Corp., a Los Angeles metals processor, announced it will acquire Clayton Metals Inc., a Wood Dale, Ill., processor and distributor of steel, aluminum, copper and brass products.


The terms of the deal were not disclosed, but for a company with over $6 billion in annual revenue, it is unlikely to make a major impact on Reliance’s finances. Clayton recorded sales of $123 million last year.


Reliance said Clayton’s management will remain in place.


The deal is expected to close by the end of the month.


Reliance is no stranger to the acquisition market. Since going public in 1994, it has made about 40 other buys.


But the $130 billion U.S. steel market is still highly fragmented, analysts say, giving companies like Reliance plenty of opportunity to expand further.


Indeed, Americans can’t seem to get enough steel. The Washington-based American Iron and Steel Institute announced that U.S. steel imports reached their highest point of the year in May, with 3.21 million tons coming in.


But the second quarter tends to be the strongest for the steel market, so this growth likely won’t keep up too long.



Investigation Terminated

Avery Dennison Corp. is getting a little less heat up in Canada.


The Pasadena-based label and office supply maker announced last month that the Canadian Competition Bureau has dropped its three-year investigation into the company’s practices.


The agency had begun looking into Avery Dennison for alleged anticompetitive activities relating to the supply of label stock and associated paper products.


The company first disclosed the investigation in 2004.



Staff reporter Richard Clough can be reached at (323) 549-5225, ext. 251, or at

[email protected]

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