Plastics Firm to Sell One of 4 Divisions : Fluorocarbon Co. Is Getting Out of Semiconductors

Fluorocarbon Co., the Laguna Niguel-based rubber and plastics molder, will sell its semiconductor division to a group of its managers and outside investors for $12 million in cash and notes, the company said Thursday.

The buyers’ group is headed by investor Keith Norby, who will become chairman of the new company. Fluorocarbon’s semiconductor division employs 250 workers in Anaheim and at five plants across the United States. Norby would not disclose details of the sale, but he did say that no management changes or layoffs are anticipated.

Kenneth J. Holland, Fluorocarbon’s vice president of finance and administration, said the sale of the division, which constitutes one-fifth of the company, is part of an ongoing strategy to rid Fluorocarbon of all divisions except the plastic and rubber operations.

As a result of the semiconductor division’s sale, Holland said, the company’s earnings will show “less fluctuation” than in the past. The semiconductor business was “not our bag,” he said. “We did not give them enough time or money.” The sale will boost Fluorocarbon’s first-quarter 1985 earnings, with a one-time gain of $430,000, to $645,000.

Analysts reacted favorably to the sale and to Fluorocarbon’s strategy of focusing on its “high-margin” plastic and rubber operations.

Fluorocarbon, which has 1,400 employees in 17 plants, does not divulge the earnings of its separate divisions. In the third quarter of 1984, ended Oct. 31, the last for which figures are available, Fluorocarbon profits totaled $2 million on revenues of $30.6 million. For all of fiscal 1984, the semiconductor division had sales of $23 million, company officials said. Both the company and the investors’ group said the division was profitable.

Fluorocarbon officials said Thursday that the company has signed a letter of intent to sell the division, which produces equipment and “quartzware,” used by semiconductor makers to fabricate silicon wafers, to the Norby group. The sale is expected to be completed in two weeks, and closed by April 24. Holland said Fluorocarbon may use the sale proceeds to acquire two firms in the plastic and rubber fields.

The move comes at a time when the highly volatile semiconductor business is in the “doldrums,” after seeing sales grow by 49% in 1984, according a spokeswoman for the Semiconductor Industry Assn. But heavy over-ordering has resulted in an inventory glut, and semiconductor makers expect a growth rate of 5% to 6% this year.

‘Makes a Lot of Sense’

The sale “makes a lot of sense,” said Jeff Kilpatrick, president of Costa Mesa-based Newport Securities. “That particular division is particularly volatile,” he said. “It’s been more of a losing proposition for the business.”

Thomas J. Foster, assistant vice president of research at Wedbush, Noble, Cooke Inc., Los Angeles, said Fluorocarbon’s quartz operations are “somewhat of a commodity business.”

The quartz plants are at the mercy of semiconductor makers who have their own in-house quartz operations, Foster said. The manufacturers will go to outside quartz suppliers only when “business is rolling” and they are at full capacity.

Slow-Growth Industry

Melvyn Simmons, vice president of Fluorocarbon’s semiconductor group who will be president of the new firm, said the slow growth of the semiconductor industry “has to be a concern,” but he added, “It won’t be that much of a problem for us” because of the division’s position in the market.

Peter Churm, Fluorocarbon’s chairman, said in a statement: “It is a little emotional, considering the sale of 20% of your business, especially when business is so good.” In addition to the semiconductor, plastics and rubber divisions, the company also has operations in fluid sealing.

“Our semiconductor group does not relate to any of our other three groups,” Churm said, “so we decided to take our semiconductor assets and put them into the other three.”

Only last month, the company announced the sale of a Birmingham, Ala., plant that manufactures braided packing materials and mechanical seals for various industries.