Sonnax Industries Inc, a maker of automatic transmission parts in Bellows Falls, was sold in early April to Marmon Holdings, Inc, a subsidiary of Warren Buffett's company, Berkshire Hathaway. Sonnax was an employee-owned company, whose ESOP was sued by the US Department of Labor, as first reported by VBM in January 2017. According to a press release and email, the new company will operate as Sonnax Transmission Company. Terms of the sale were not disclosed. The company will remain in Vermont.
Sonnax has been one of Vermont's fastest growing manufacturers with three plants in Bellows Falls. Revenues over the last 10 years have nearly doubled. At the end of last year, Sonnax had 246 employees with 200 in Vermont and 46 in New Jersey. In 2017 it reported to VBM that revenues were $67.5 million.
As an employee-owned company, the sale was overwhelmingly approved by a vote of Sonnax employees. Steve Boyer was named the new president of Sonnax Transmission. The company said Boyers will work closely with Sonnax Industries CEO Tommy Harmon to ensure a smooth transition into Marmon.
"Joining Marmon affords Sonnax employees the support and stability of a very successful global organization while maintaining its homegrown, entrepreneurial feel," Harmon said in a statement. "Above all, this expands what we can deliver to our customers, so our future is bright."
Marmon Holdings is an umbrella company for 175 independent manufacturing and service businesses with facilities in 23 countries and total revenues exceeding $7.7 billion in 2017.
As for the lawsuit, the DOL alleged that the new employee owners were charged too much for the company.
The DOL's James Lally told VBM in an email that the Sonnax litigation was stayed, pending anticipated settlement, following a mediation held on November 17, 2017. The court granted the stay on November 27 "conditioned upon a contingent event which is highly likely to occur, but which is not certain to occur. This contingent event will occur, if it occurs, within the next 90 to 120 days."
If the sale of Sonnax was the "contingent event," it came at the tail-end of the 120-day window described in the court filing. The press release announcing the sale to Marmon was dated April 4, 2018.
Tristram Coffin of Downs Rachlin Martin PLLC of Burlington represented Sonnax, Harmon, Fritz and the Sonnax ESOP.
The US DOL alleged that First Bankers Trust Services, Inc's 2011 purchase of the company on behalf of the ESOP from its two previous owners caused the plan to suffer sizable financial losses. Named in the suit (filed with the US District Court District of Vermont December 28, 2016) were Sonnax, a supplier of automotive drivetrain products; Tommy Harmon, its president and chief executive officer; Frederick Fritz, a board member with substantial company control; and First Bankers, headquartered in Quincy, Illinois. Sonnax, Harmon and Fritz hired First Bankers in 2010 as an independent fiduciary to advise the ESOP on whether, and at what price, to purchase shares of Sonnax from Harmon and Fritz. All defendants are fiduciaries of and parties in interest to the ESOP. The DOL complaint says, in part, "First Bankers caused the ESOP to overpay for Sonnax stock by millions of dollars." And DOL maintains that Sonnax, Harmon and Fritz knew it was too high, "or should have known."
View the entire article in Vermont Business Magazine, by Bruce Edwards
Timothy McQuiston contributed to this report.