Harbour Group Industries, Inc.

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Harbour Group Industries, Inc.

7701 Forsyth Boulevard, Suite 600
St. Louis, Missouri 63105-1892
U.S.A.
Telephone: (314) 727-5550
Fax: (314) 717-9912
Web site: http://www.harbourgroup.com

Private Company
Incorporated: 1976
Employees: 3,282
Sales: $237 million (2006 est.)
NAIC: 523999 Miscellaneous Financial Investment Activities

Harbour Group Industries, Inc., is a privately owned company that acquires and builds companies, instilling management teams that realize efficiencies, offer new growth strategies, and oversee new product development. Based in St. Louis, Missouri, Harbour Group, in short, seeks to enhance every aspect of the companies it acquires. Harbour invests heavily in plant and equipment, expands and improves marketing and distribution, and makes strategic, complementary acquisitions. The firm has acquired more than 150 companies since its launch in 1976.

Harbour's portfolio includes companies in the following lines of work: LED lighting systems; motion control; tool distribution for tools used in construction, masonry, metalworking, and glass installation; lubricating systems; entertainment products such as tabletop entertainment systems found in taverns and restaurants; music products, specifically commercial and home jukeboxes; performance products such as automotive gauges and testing equipment; heat exchangers; and plastics processing, including blending, mixing, and materials handling equipment used in the plastic processing industry. Harbour's founder is Sam Fox, who served as chairman and CEO until 2007, when he became U.S. ambassador to Belgium. At that time his son, Jeffrey, became CEO and interim chairman, with the expectation that Sam Fox would return to the chairmanship following his ambassadorial service.

FOUNDER, MISSOURI-BORN: 1929

Sam Fox was born in 1929 in Desloge, Missouri, the son of Ukrainian Jews who fled the persecution of Czarist Russia. His father, Michel Fuks, left the family behind in 1914 to make a life in the United States. At Ellis Island, New York, he was given a more Anglican name: Max Fox. When he lost his job, Fox borrowed money from relatives to buy a horse and wagon. He settled in the small town of Desloge, some 70 miles south of St. Louis, because, he said, that was where his horse gave out.

In Desloge, Max Fox became a produce merchant and inveterate entrepreneur, trading in furs and hides that he bought from area farmers and trappers, and eventually selling real estate. By 1921 he had saved enough money to send for his wife and daughter, and together they added six more children to the population, the youngest being Sam Fox.

Growing up during the Great Depression of the 1930s, Sam Fox lived in modest circumstances; the family relied on outhouses instead of flush toilets until he was eight. Although his father was not a particularly prosperous businessman he loved the freedom and opportunity provided by the United States, and he instilled the same spirit in Sam and his siblings. Max and his wife Fanny also taught their children the importance of charity; they were always willing to provide a meal to a stranger or a bed for the night, and there was always a spare coin to drop in the tzedakah box, a traditional way for Jewish families to collect money for people in need.

The Desloge of Fox's youth lacked a public library and its public high school employed only four teachers. With the encouragement of his oldest sister, Esther, however, Fox decided to pursue a college degree. He started saving money for his schooling at the age of 15, when he and some friends began spending summers at a Del Monte canning factory in northern Illinois. There they were given free room and board and allowed to work for as many hours as they could stay awake canning peas and corn. Fox saved every penny, which he used to pay tuition expenses when he enrolled at Washington University in St. Louis. He was also able to save on room and board by living with his sister and her husband in the city. His budding entrepreneurial efforts also helped him earn money for his living expenses. He sold Fuller brushes door to door, and he sold burlap bags procured from feed stores to contractors for use at construction sites. With the advent of the Korean War, which created a shortage of steel, he also salvaged steel from wrecking companies and built and installed a bridge at a new home construction site.

Fox also thrived in the classroom, where he found himself intellectually stimulated far beyond anything he had experienced previously. In 1951 he graduated with honors from Washington University, earning a degree in business administration. Rather than taking an offered position with A. G. Edwards, a St. Louis brokerage house, Fox decided to work for his brother Irwin across the Mississippi River in Madison, Illinois, where he had established Fox Industries, a manufacturer of powdered iron for the chemical industry. The Fox brothers later developed a 50-acre industrial park as well as a warehousing business. Irwin Fox was well-versed in all aspects of manufacturing and he served as a mentor for his brother, who soon shared the older brother's enthusiasm for manufacturing and eventually served as the company's president.

The 1950s and 1960s were a golden era for American manufacturing, but by the 1970s foreign competition began to take its toll. The closing of old factories gave rise to the term "Rust Belt" as a description of the industrial Midwest. When Irwin grew ill, the brothers sold Fox Industries in 1972.

TOWARD EFFICIENCY AND EXCELLENCE: 1976

In 1976, Sam Fox formed Harbour Group. A firm believer that American manufacturers could still compete, his initial plan was to acquire three manufacturing companies and improve their performance by making them more efficient. In 1976 Harbour purchased Synthetic Industries, Inc., and built an operation in the North of Ireland called Synthetic Industries (Ireland), Ltd. The companies converted polypropylene resin to yarn, and with that yarn then manufactured a variety of industrial products. They would form the foundation for what would become Harbour's polypropylene group.

Next, in 1979, Harbour turned its attention to agricultural equipment, picking up Hinson Manufacturing Company, which produced large tractor cabs for farm-implement manufacturing companies. From the outset, Harbour Group had developed a strategy to dramatically improve manufacturing companies. "Our formula has three legs to the stool," Fox told Financial World in 1997. He explained: "We want to be the best-cost producer, and that doesn't mean making it on the cheap. It means making it smart. Second, we want to make the highest-quality products. And third, we want to provide outstanding customer service." Harbour was also selective in the companies it acquired, searching for firms in fragmented industries where complementary acquisitions and plant consolidations could accelerate growth.

COMPANY PERSPECTIVES

At Harbour Group, we concentrate on one thing: building businesses.

A DECADE OF GROWTH

In the 1980s Fox acquired scores of manufacturing companies, tapping into a variety of funding sources in addition to banks, including pension funds, insurance companies, and corporate foundations. As a result, Harbour was regarded by some as a leveraged buyout firm (LBO), a designation with which Fox took issue. "LBO firms are financial houses that make financial investment in companies and hope and pray that management will do a good job with the companies," he explained to Financial World, continuing, "We're an industrial manufacturing company that happens to use leverage." Unlike some LBO firms of the era, which made acquisitions to sell off assets piecemeal at a profit, leaving a decimated company in its wake, Harbour focused on building companies over a long period, patiently building value.

More industrial fabrics were added to the polypropylene group in 1980 through the acquisition of Synthetic Industries (Texas), Inc. The following year fibrillated polypropylene yarn was added through the addition of Fibron Corporation of Tennessee. By 1985, Synthetic Industries, maker of packaging fabrics, and concrete additive producer Fibermesh, Inc., were also added to the group.

In 1985 Harbour ventured into the medical products business with the acquisition of Allied Healthcare Products, Inc. Its products included medical gas systems and respiratory therapy equipment. Three more companies were added before Harbour took Allied public in 1992. Another seven medical acquisitions were made over the next four years.

Also in 1985 Harbour bought Prosser Industries, Inc., a manufacturer of submersible pumps and rotary spray cleaners. This purchase laid the foundation for the process equipment group. In seven years six more companies were brought into the fold, including manufacturers of centrifugal pumps and turbine pumps. In 1986 Harbour established one new group and became involved in two other industries. The cutting tools group was launched with the acquisition of Green-field Industries, Inc. (maker of such high speed steel products as taps, dies, drills, end mills and dieheads) and Rogers Tool Works, Inc. (which made similar products from tungsten carbide). Seven more acquisitions were completed in the 1980s, and a dozen more filled out the cutting tools group by 1996. This group eventually became the second largest rotary tool manufacturing company in the world.

Also in 1986 Harbour entered the master alloys field with the addition of KB Alloy, Inc., a manufacturer of aluminum grain refiners, aluminum hardeners, and specialty alloys; and precision optics through the purchase of telescope manufacturer Meade Instruments Corporation. Harbour closed the decade with the acquisition of JM Clipper Corporation, a maker of industrials seals. This deal laid the foundation for the molded rubber group, which in the early 1990s added companies that made a variety of molded rubber and elastomer products. During this entire period, the Harbour Group manufacturing team grew extensively.

Also during the 1980s Sam Fox's two elder sons, Jeffrey and Greg, joined the business. Jeffrey ultimately became CEO, while Greg became operations group president. A third son, Steve, joined the business in the mid-1990s and became managing director in the acquisitions department.

ADDING INDUSTRIES, CREATING GROUPS

Harbour and its investment funds continued to move into new industries in the 1990s. Engineered Polymers Corporation, a maker of injection molded and structural foam products, provided entry into the plastic molding industry. A new group, air filtration, was started in 1992 with the acquisition of Pneumatic Products Corporation, a maker of compressed air and gas purification systems. Over the next three years, eight more companies were added to fill out the unit, including manufacturers of industrial air systems, compressor cooling systems, industrial filtration products, air hydration equipment, industrial heat pumps, and desiccant compressed air dryers. Also in 1992, Harbour bought three companies to create a special machine and stamping group, supplemented by a dozen more acquisitions over the next five years.

During the mid-1980s, Harbour found it controlled so many companies that tracking the financial performance of the different units was becoming increasingly difficult. In response, Harbour developed a sophisticated system to track manufacturing, sales, and financial matters. As each new company joined the Harbour Group family, these management information systems were installed, and Harbour Group personnel trained the newly acquired company's personnel in its use.

KEY DATES

1976:: Sam Fox forms the Harbour Group.
1985:: Medical Products Group is formed.
1992:: Special Machine and Stamping Group formed.
1995:: Industrial Springs Group formed.
2000:: Chimney and Fireplace Products Group formed.

Harbour continued to grow in the mid- and late 1990s. The fluid handling group was established in 1994 with the acquisition of Titan Tool, Inc., a manufacturer of paint spraying guns and tips and airless compact pumps, and Progressive Carbide, which produced carbide paint spray nozzles. Over the next decade, 11 more companies were added to this group. Harbour launched three new groups in 1995: industrial springs, construction equipment, and plastic processing equipment. In addition, Harbour acquired Reedrill Corporation, a manufacturer of proprietary drilling equipment, to enter the mining equipment field. In the latter part of the 1990s Harbour created new groups in automotive accessories, computer components, building components, and textile machinery. It also became involved in heat exchangers through the 1998 acquisition of Southern Heat Exchanger Corporation.

Despite a cooling economy, Harbour did not shy from acquiring more manufacturing companies in the new century. The chimney and fireplace products group was established in 2000, followed by the specialty distribution group, performance products group, and entertainment products group in 2002. A year later the music products group was added, and in 2004 the lighting products group was created. The lubricating systems group was added in 2005, followed by the tool distribution group in 2006, and the motion control and LED lighting group in 2007.

Along the way, Sam Fox became not only wealthy, but also one of St. Louis's leading citizens, serving on the boards of many St. Louis institutions. In the 1980s he also became involved in politics, citing concern about the ballooning federal deficit. He became a major contributor to the Republican Party, and in the 2000s became an ardent supporter of George W. Bush, who named him U.S. ambassador to Belgium in 2004. To serve his post, Fox turned over the reins of Harbour Group to his son Jeffrey, who was named CEO and interim chairman, while Samuel A. Hamacher was named president.

Ed Dinger

PRINCIPAL DIVISIONS

LED Lighting; Motion Control; Tool Distribution; Lubricating Systems; Entertainment Products; Performance Products; Heat Exchangers; Plastic Processing.