Thursday, October 27, 2005
By WILLIAM FREEBAIRN
WEST SPRINGFIELD – Atlantic Fasteners Co. Inc. will become employee-owned tomorrow, a move the owners said will keep the company from moving and provide retirement benefits for workers.
The company will be sold tomorrow to a trust known as an employee stock ownership plan, which exists as a form of retirement savings program.
The company is currently majority owned by company chairman and chief executive Patrick J. O’Toole.
O’Toole said selling the company to a trust for the benefit of workers was attractive compared to selling out to a competitor. “The risk is, as you know, they could move you out to some other location,” he said.
Employee-owned companies typically perform better than those owned privately, he said, and keep jobs from moving out of state, O’Toole said. Employee ownership is becoming more popular, he said.
When workers are owners, they often improve the performance of the company.
“I think it’s terrific for the country,” he said.
The owners will be paid an undisclosed amount for their shares of Atlantic. The amount is between $5 million and $10 million, officials said.
Half the funds will be raised by a bank loan to the company, the other half is being advanced by the owners. The loans must be repaid from company coffers over about 12 years.
Gradually, as the loan is paid off, the employees will see the value of their individual stakes in the company rise. Employees who leave the company will get paid the value of their ownership, possibly over several years, into a retirement account, said company president Tony Peterson, a minority owner.
Peterson and O’Toole will remain with the firm and retain their titles.
Statewide, there are 95 companies that are fully or partly owned by an employee stock ownership plan.
The value of the employees’ stake in any such company can rise and fall annually based on an independent appraisal of the firm, based on its financial performance. In a review of such companies in 1999, the state Office of Employee Involvement and Ownership found that some employees saw their stakes increase by factors of five, while others saw their share drop to a fraction of its former value.
Atlantic Fasteners will be managed by three trustees who are employees of the company. O’Toole and Peterson will be two of the trustees. Atlantic Fasteners will benefit from the fact that corporations of its type that go to employee ownership pay no corporate income tax, O’Toole said.
The company, located on Heywood Avenue in West Springfield, will celebrate the impending transaction today. The company distributes bolts, screws and other fasteners to commercial and aerospace firms, mostly in New England.
The firm was a small company in financial trouble when O’Toole bought the firm in 1981 and has grown to more than $13 million in sales, he said.
© 2005 The Republican. Used with permission.