Mohawk purchases global tile manufacturer
Carpet manufacturer Mohawk Industries has entered into a definitive agreement to acquire the Marazzi Group, a worldwide maker and marketer of ceramic tile, for $1.5 billion in cash and equity. The deal is expected to close during the first quarter of 2013.
The Marazzi Group is held by the Marazzi family and two private equity funds — Permira and Private Equity Partners. It operates in most major geographies, including Russia, the United States, Italy, France, Spain, China and Mexico. Marazzi’s 2011 revenues were approximately $1.16 billion.
Marazzi distributes ceramic tile in more than 100 countries through a strong international sales force, which will increase Mohawk’s worldwide growth.
Marazzi has the No. 1 position in the Russian ceramic market, the announcement said. The company operates two manufacturing sites and 21 regional distribution centers. Marazzi owns and franchises more than 300 retail stores that carry only Marazzi products. About 50% of the Marazzi Russian business is sold directly to end users, and the retail advertising done by the stores has created a strong consumer brand
In the United States, Marazzi’s products are sold through independent distributors, home centers and a few company service centers. Leveraging the combined manufacturing expertise, design capabilities and distribution systems, the company hopes to grow its ceramic business.
Jeff Lorberbaum, Mohawk’s chairman and CEO, said in a prepared statement: "This acquisition represents the next step in the expansion of Mohawk’s global business and will make Mohawk a stronger company. We found Marrazi attractive because of its solid management team and leadership positions in the United States, Russia and Europe. Marazzi’s differentiated products, leading-edge design, efficient manufacturing and exemplary service have created one of the most valued brands in the industry. We have many opportunities to improve results by leveraging best practices, operational expertise, product innovation and manufacturing assets."
PRO Group gets a new owner
Denver, Col.-based PRO Group, a hardware industry merchandising and marketing organization, announced an ownership change that makes president and CEO Steve Synnott the new owner.
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Synnott, a 20-year veteran of PRO Group, bought the privately held organization from Gary Cosgrave, the son of the group’s founders, for an undisclosed price.
Paul and Hazel Cosgrave founded PRO Group in 1953.
Gary Cosgrave, the company’s chairman of the board, will remain involved in PRO Group’s strategic planning and said nothing will change in the company’s operations or staff, according to a release announcing the change.
“Steve Synnott has demonstrated his leadership capabilities and integrity," Cosgrave said. "I have confidence in Steve’s commitment to leverage the group’s marketing strength. The sale ensures perpetuation of the company my family started. I look forward to continuing my responsibility to support the success of independent retailers in today’s competitive market. We have an outstanding team in place to do that.”
PRO Group remains dedicated to the success of independent retailers. Marketing, advertising and buying advantages will remain cornerstones of the company’s value to retail, wholesale and manufacturing channel partners. PRO Group’s members include 26 distributors.
More employees covered by self-insured health plans
The percentage of U.S. workers in private-sector self-insured health plans has been increasing. In 2011, 58.5% of workers with employer-provided health coverage were in self-insured plans, up from 40.9% in 1998, according to a November 2012 report by the not-for-profit Employee Benefit Research Institute (EBRI).
With a self-insured plan, the employer assumes most of the financial risk related to health insurance, often securing stop-loss coverage from an insurer only to cover unexpectedly large or catastrophic claims; the plan is managed by a third-party administrator, typically an insurance company.
With a fully insured plan, an insurer is paid to assume the risk, as well as manage the plan.
Historically, large employers have been far more likely to self-insure than have been small employers, the EBRI report noted, and there are significant incentives for them to do so: Large multistate employers can provide uniform health benefits across state lines if they self-insure (lowering administrative costs) and are not required to cover state-mandated health care services — as are fully insured plans.
To date, large employers (with 1,000 or more workers) have driven the upward trend in overall self-insurance. The percentage of workers in self-insured plans in firms with fewer than 50 employees has remained close to 12% in most years examined.
Impact of healthcare reform
Following the passage and implementation of the Patient Protection and Affordable Care Act (PPACA), there has been speculation that an increasing number of smaller employers would opt for self-insurance. One reason is a widespread presumption among employers that the PPACA’s coverage requirements, and the new taxes the statute imposes, will work to drive up the cost of health coverage. “Employers generally, and small employers particularly, are concerned about the rising cost of providing health coverage and may view self-insurance as a better way to control expected cost increases,” noted Paul Fronstin, director of EBRI’s health research and education program, in a media release.
Massachusetts as bellwether
Massachusetts, the only state to have enacted health reform similar to the PPACA, has seen an increase in the percentage of workers in self-insured plans among all firm-size cohorts, except among workers in firms with fewer than 50 employees. Overall, 73.8% of workers in Massachusetts were in self-insured plans in 2011, the highest rate in the nation.
Since 2006, when Massachusetts passed its health care reform law, the percentage of workers statewide in self-insured plans has increased as follows:
• In firms with 50-99 employees, from 54.4% in 2006 to 67.2% in 2011.
• In firms with 100-999 employees, from 16.6% to 29.2%.
• In firms with 1,000 or more employees, from 74.1% to 86.4%.
If Massachusetts proves to be a model for the nation, more employers will shift to self-funding as health care reform is implemented.
©2012 SHRM. All rights reserved.
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