Royal Group Technologies
From Wikipedia, the free encyclopedia
Royal Group Technologies is a large Canadian building supplies maker and plastics company. Based in Woodbridge, Ontario it also has operations in much of Latin America and in Poland and China. In recent years it has been plagued by scandals and financial loses.
The company was founded as Royal Plastics Group in 1970 by Vic De Zen. It quickly rose to become on of Canada's largest plastic makers, specializing in PVC pipe, window profiles, and other plastics products. It had its own chemical plant in Bradford, Ontario and a large PVC recycling facility. The company developed the Royal Building System, a construction technique using PVC frames filled with concrete, that allows very sturdy structures to be constructured in only a few days. It also moved into other areas, such as lawn furniture. It also moved into metals with its Baron Metal subsidiary.
The company went public in 1994, and the stock rapidly increased and three years later De Zen's own holdings were worth $600 million. Because of generous stock options some 200 other employees became millionaires as well. In 1997 the company was renamed Royal Group Technologies as sale grew to $2 billion per year.
In 2003 investors began to complain about the company, which was seeing falling earnings. De Zen retained over 80% of the votes at shareholders meeting, and continued to pay himself a multi-million dollar bonus. The stock price collapsed from over $30 to under $7 in little over a year. Losing money, it placed its money losing window coverings division under new management. In November 2003 De Zen resigned as CEO, being replaced by Douglas Dunsmuir. He remained chairman, and through his stock holdings control of the company. The stock recovered somewhat, increasing in value by over 70% over the next months.
However in February 2004 the Ontario Securities Commission and RCMP announced that they were investigating the company in connection with land deals in the Caribbean. The stock again fell sharply. This caused problems for Greg Sorbara, a former Royal Group board member, who had become Ontario's finance minister in 2003. The investigation focused on De Zen Dunsmuir and former CFO Gary Brown. It was alleged that the Royal Group has defrauded shareholders in its relation with a resort owned by the executives on the island of St. Kitts.
In November 2004 forensic auditors found another suspicious land deal in Canada in which De Zen and other executives had bought land and then resold it to the company. They found that a 75 hectare lot in Woodbridge had been purchased for $20.5 million and then resold to Royal Group that same day for $27 million. The company fired De Zen as chairman, Dunsmuir, and new CFO Ron Goegan. James Sardo was appointed as the new CEO. The scandal also affected Scotiabank, the company's banker, which was subject to a high profile RCMP raid in February 2005.
In March 2005 De Zen relinquished control over the company when he exchanged his multiple-voting shares for common stock. This left the company an attractive target for a takeover attempt. It was reported that Cerberus Capital Management was preparing a $1.3-billion bid for the firm.
Royal Group is in the process of being acquired by Georgia Gulf Corporation, a large PVC raw-material manufacturer.
