Business First - Job assurances a key to ECIDA support of Gemcor sale
Wed, Jan 27th 2016 09:00 am
by James Fink
To the directors of the Erie County Industrial Development Agency, the payback from its Gemcor investment was nice but even better is a job-retention clause that may serve as a new benchmark for future deals.
The key element in the pact with Gemcor's ownership — present and going forward — is that the West Seneca company will not only retain at least 85 percent of its current workforce and benefits currently being offered, the firm will be eligible to tap into a $1 million escrow account.
The complex deal was crafted between Gemcor, the ECIDA staff and Erie County Executive Mark Poloncarz and was officially approved by the agency's directors during their Jan. 27 meeting. The sale was announced in early January.
"We protected both jobs and benefits," Poloncarz said.
Gemcor is in the final stages of being sold to a similar California-based aviation industries company. As part of the proposed Gemcor sale to Ascent Aerospace, the ECIDA has invoked a clause asking the Santa Ana, Calif.-based buyer of the West Seneca firm to put $1 million into an escrow account that will be used to insure that all 90 Gemcor employees remain on the job.
Ascent is believed to be paying $44 million for Gemcor.
The clause comes from a 25 percent ownership stake the ECIDA has in Gemcor.
The ECIDA stands to make somewhere around $9.75 million from its Gemcor shares once the sale is completed, presumably by the end of the 2016 first quarter. The county development agency invested $500,000 in Gemcor a dozen years ago.
Under the sale terms, Ascent Aerospace will put $1 million into a job-retention escrow account. Under annual monitoring by the ECIDA, if Gemcor still has 72 employees — roughly 85 percent of its current workforce — at the West Seneca plant five years from now, $500,000 will be returned to Ascent Aerospace. If not, the funds revert to the ECIDA.
Employees must have their current benefits and salary, or better, for the funds to be allocated from the escrow account.
For each of the following five subsequent years, if the 72 employee figure is met or exceeded, Ascent Aerospace will receive $100,000 annually. Should employment numbers drop below that figure, the money goes from the escrow account to the ECIDA.
The job and benefits retention clause was critical, Poloncarz said.
"We see over any period of time when a local company is sold to an out-of-state concern, we lose jobs," Poloncarz said.
This time, the pact may open the door for Ascent Aerospace to consider the region for expansion projects, noted both Poloncarz and Steve Weathers, ECIDA president and CEO.
"For us, it's about the jobs," Weathers said. "Job retention, and possibly job creation, are the linchpins to making this happen."
Because the ECIDA has a 25-percent ownership stake in Gemcor, the sale needed agency approval.
The job retention stipulation is a first for the ECIDA.
Weathers hopes the pact may open the door for Ascent Aerospace to not only retain its current West Seneca workforce, but perhaps bring more work to the plant. Gemcor produces automatic riveting machines used in the aviation industry. It products are found in aircraft wings and fuselages.
"We want to use this as an opportunity to help Ascent bring other opportunities — whatever they may be — here," Weathers said. "We wanted to make sure that nothing was lost in terms of jobs."
Weathers said besides the $1 million job retention escrow account, the remaining funds the ECIDA receives from the Gemcor sale will be allocated for small business loan programs and future venture capital opportunities.
Besides the ECIDA, Rand Capital, which has a 31 percent ownership stake in Gemcor, may see its $625,000 investment made in 2004 translate into a $13.4 million profit when the deal closes.