PW Eagle: Stand-alone days are numbered

PW Eagle may not have much longer to live as an independent company, but at least it's going out on a high note.

The company traces its roots to Pacific Plastics, an Oregon company founded in 1967. In the mid-1990s, Pacific Plastics and a Nebraska company, Eagle Plastics, were bought by a shell company; the combined entity became PW Eagle in 2000.

The company experienced stagnant sales and frequent losses in the early years of this decade, but its fortunes turned around with the big housing boom, with developers and municipalities buying its pipes for new water and sewer lines.

PW Eagle also came out ahead after the Gulf Coast hurricanes in 2005, which disrupted much of the nation's supply of plastic resin.

The destruction also pushed up prices for polyvinyl chloride (PVC) pipe and created the need for miles of new pipe for rebuilding. Sales jumped from $475 million in 2004 to $694 million in 2005 and $714 million last year; the company went from a $5.5 million loss in 2004 to profits of $47 million and $60.7 million the past two years.

The company's stock responded but not enough for some.

One activist hedge fund, Pirate Capital, began buying PW Eagle shares early in 2006 and now has accumulated a 22 percent stake; Pirate, along with other aggressive institutional investors, pressed PW Eagle's management to do more to "enhance shareholder value" — usually code for putting a company on the auction block.

In April 2006, PW Eagle restructured its board, giving Pirate two of the seven seats. And in January, it announced that it had agreed to sell itself to rival J-M Manufacturing for $33.50 a share, or about $400 million. (J-M, which claims to be the world's largest maker of plastic pipe, is based in New Jersey. It is owned by Formosa Plastics Group, a Taiwanese conglomerate.)

PW Eagle's shareholders approved the proposed deal in April, but federal antitrust authorities have yet to sign off on it. Because the deal is still under review, PW Eagle's executives declined to speak with The Seattle Times for this story; however, the company has said it doesn't expect the merger to be completed until sometime this summer, at the earliest.

Meanwhile, PW Eagle continues on its profitable path, though at a lower level from last year. It earned $5.4 million in the first quarter on sales of $150.3 million; profit would have been $2 million, or 11 cents per share, higher if not for expenses related to the J-M deal.