Ceradyne Inc. disappeared from the Business Journal’s list of the largest public companies based in Orange County with last year’s $860 million sale to 3M Co.
It’s still in the mix here, though, running its ceramics-based manufacturing operations from Costa Mesa, the center for production of its various lines, which include body armor and a host of industrial products.
And it’s getting better known in St. Paul, Minn., the longtime headquarters of 3M, a perennial member of the Dow Jones Industrial Average and the S&P 500.
Ceradyne’s founder and former chief executive, Joel Moskowitz, now serves as a consultant to 3M and travels to headquarters often enough to keep an office there.
“I gave a major presentation earlier last month in St. Paul,” he said. “It was extremely well-attended by a whole array of not only executives but scientists and marketing people from all 3M businesses. I was very happy about that. I discussed all of the Ceradyne products in some level of detail, including those that weren’t presently available. I anticipate that 3M will do a great job with those things we were working on [before the acquisition], such as oil and gas and pharmaceuticals.”
Moskowtiz’ regular commute between OC and St. Paul falls in line with the strategy behind 3M’s buy of Ceradyne. It was a case of “technology-sharing [that] goes both ways,” according to Mark Colin, a vice president at 3M who oversees the company’s advanced-ceramics business and now serves as president of Ceradyne.
Several other Ceradyne alums also consult for 3M, including former Chief Financial Officer Jerrold Pellizzon and David Reed, former president of the company’s North American operations.
“They continue to be very engaged with me and help me understand the business,” Colin said. “As far as being the engineering and technical guy, that’s not my background. I’ve been with 3M for 26 years in a lot of functions, but for me, I’m mostly working with Ceradyne and 3M people to develop the best plans for integration. We’re doing a lot of work on synergies, looking at where we can find growth and especially where we are going internationally.”
3M has business in more than 60 countries. International sales accounted for 65% of the company’s annual revenue last year, which totaled $29.9 billion. 3M’s employee base of about 87,700 includes nearly 53,000 workers outside of the U.S.
Ceradyne has facilities in a handful of states in the U.S., along with subsidiaries in Canada, Germany and China.
• Headquarters: St. Paul, Minn.
• Business: Diversified manufacturer
• Founded: 1902
• Ticker symbol: MMM (NYSE)
• 2012 revenue: $29.9 billion
• Recent earnings: $991 million for Q4
• Market value: About $73 billion
• Notable: Paid $860 million for Costa Mesa-based Ceradyne Inc. last year
It has about 2,000 employees overall, with 680 in Orange County.
“We’re really working on using 3M’s international platform for Ceradyne,” Colin said. “Ceradyne has facilities in a few countries, but not as broad as 3M. This could really accelerate Ceradyne’s growth. We have had a lot of pull from international colleagues saying, ‘How can we help sell the Ceradyne products?’”
Recent Contract
Ceradyne recently landed a contract to supply more than $40 million worth of body armor plates to the U.S. government.
The order, which was the first announced contract after the acquisition, was placed through the Foreign Military Sales program, the U.S. government’s method of procuring defense articles and services for foreign governments. It is expected to deliver 242,000 plates over a six-month span.
Ceradyne’s specialty in certain chemical materials bodes well for 3M, according to Colin.
“We had a ceramics platform already, but it was nothing like Ceradyne’s,” he said. “We didn’t have any boron carbide capabilities. This acquisition definitely strengthens that.”
The boron-carbon chemical composition is among the lightest and hardest ceramic materials and is typically used in armor and bulletproof vests.
“Our defense [products are] primarily boron carbide, and that immediately gives 3M the technology to make extremely hard lightweight materials,” Moskowitz said.
Ceradyne operates a boron facility in Quapaw, Okla.
Boron is just a part of the company’s base of various chemical materials.
Silicon Dioxide
“For the solar business, we have a material called silicon dioxide,” Moskowitz said. “We have operations in China that puts us in a good position for that. … We also have early-stage materials of very special shapes that are protected by intellectual property. Silicon carbide is used in the oil and gas industry and in the pharmaceutical industry. Silicon nitride is used in a host of applications, including automobile and diesel engines.”
Those substances fall into a category known as nonoxide ceramics, which Colin said could well serve 3M’s existing technology capabilities.
“10 years from now, there will be products in every 3M business that’s going to benefit from this technology,” he said.
Moskowitz said the decision to sell Ceradyne has turned out well but that it wasn’t an obvious choice when 3M first approached with an offer.
“I had no interest—although for some time, [I had known] that there would have to be some changes at Ceradyne,” he said. “I’ll be 74 years old next month. I am the founder … started it back in 1967. And also we had a series of new products in the pipeline that would have to be brought to market. That required different marketing techniques than our traditional businesses. But still … I wasn’t interested in selling the company. Change came in May of 2012.”
Continued discussions with 3M and visits to the company eventually led Moskowitz to conclude that “if I decided to sell the company, 3M would be the perfect acquirer.”
Longtime Relationship
A long-standing relationship between the companies helped the deal along, Colin said.
The two have been working together since the 1980s, when Ceradyne began to supply made-in-Costa Mesa orthodontic bracket products to 3M’s orthodontic division, Unitek, which has a facility in Monrovia.
“We ended up with a joint patent in the late 1980s,” Moskowitz said. “Ceradyne developed a translucent ceramic that had strong structural properties. And 3M saw that as a possible replacement for the traditional metal orthodontic bracket. It was their design and our materials. That became the super winner. And today we are the prime supplier [of] this product.”
Colin said there’s no plan to relocate Ceradyne’s operations.
“No doubt, right in OC, Ceradyne has … people in Costa Mesa, great [research and development], manufacturing capabilities, engineering capabilities and a lot of government contracts,” he said. “Those are the core competencies of the business. We don’t want to disturb any of that. The brand, however, is a more complex question. Both Ceradyne and 3M are strong brands. We’re evaluating the best combinations.”
