Baumgartners turn over Paper Machinery to surprised employees

Baumgartners turn over Paper Machinery to surprised employees

By Rick Barrett of the Journal Sentinel

A family with some of Milwaukee’s deepest manufacturing roots has decided to turn its company over to the people it credits most for its success.

The families of Donald Baumgartner and his son, John, owners of Paper Machinery Corp., handed the 65-year-old Milwaukee company over to stunned employees Monday through an employee stock ownership plan, a change that over time could put hundreds of thousands of dollars into the retirement accounts of some longtime workers.

Paper Machinery says it’s the world’s leading manufacturer of machines used to produce paperboard cups and containers for brands like McDonald’s, Starbucks, KFC and Tim Hortons.

The announcement of the change was made at an employee meeting in a big party tent in front of the company headquarters, with plenty of beer, food and a jazz band.

Not knowing what to expect, some workers were worried that Paper Machinery was being sold to another company.

“I would have to say there was a lot of anxiety. But I would be willing to bet now that everybody’s elated,” said Greg Winn from Menomonee Falls, a tooling designer who has worked at the company for 36 years. “We were really floored and pleasantly surprised.”

Located at 8900 W. Bradley Road, Paper Machinery employs 250 people and posts more than $100 million in annual revenue. The company is now 100% employee owned.

“This is great news for our employees and great news for Milwaukee. The transition to employee ownership will ensure that Paper Machinery Corporation’s legacy will continue right here in Milwaukee for generations to come,” said Donald Baumgartner, who founded the company in 1951, and whose family has been manufacturing machinery in Milwaukee since the 1930s.

Under the new employee stock ownership plan (ESOP), eligible employees will earn shares of Paper Machinery Corp. stock over time. An ESOP is a federally regulated retirement plan that invests in the stock of an employer on behalf of its employees.

The plan is in addition to the employees’ existing retirement benefits.

The company would have to remain profitable and meet its goals in order for the employee owners to realize the maximum benefits.

Some production employees could retire with more than a million dollars, said Steve Barth, an attorney with the Milwaukee law firm Foley & Lardner, legal counsel to the company in the transaction.

The Baumgartner family has been engrained in Milwaukee’s manufacturing history for decades, from building machinery in the family garage to launching Milwaukee companies including Reliable Tool and Mercury Engineering, as well as Paper Machinery.

Donald Baumgartner got his start working for his father, John Robert Baumgartner. He went on to follow in his father’s footsteps, founding Paper Machinery in 1951.

Every facet of the company’s engineering, manufacturing and service takes place at the company’s Milwaukee headquarters.

“We are deeply committed to Milwaukee and to our employees,” Donald Baumgartner said. “When the time came to transition ownership, the choice was clear. Who better to carry on our legacy and tradition than the people who made the business successful in the first place — our managers and employees.”

Over the years, Baumgartner said, he saw too many companies where employees lost their jobs after the business they worked for was sold.

“I watched my father build and sell three companies in Milwaukee, all three of which were moved out of state. I didn’t want that to happen again,” he said.

From those experiences, Donald Baumgartner and his son John decided that an ESOP was the best succession plan for Paper Machinery.

“This is a family business. Our employees are our family, making a transition to an employee-owned company a natural fit,” said John Baumgartner, former president of Paper Machinery and now a member of the board of directors.

The business has grown rapidly in recent years, adding 50 jobs since 2014.

The Baumgartners will benefit from the sale of the shares to the ESOP, but not nearly as much as they would have from selling the company to another buyer.

“Despite my many strong recommendations that they market Paper Machinery Corp. to a third-party buyer, at a likely much-higher, cash-upfront purchase price, they instead insisted on pursuing an ESOP sale to ensure that their employees would be rewarded for helping them build PMC into the great company that it is today,” Barth said.

“The Baumgartners put their employees, customers and community above their own personal interests in pursuing this transaction. Really quite remarkable, and very inspirational both professionally and personally,” Barth added.

Operational control of the company is being transitioned to longtime managers Luca Dellomodarme, Scott Koehler and Michael Kazmierski.

“The success or the failure of the company is in the hands of the people who work here every day. We will be doing what we have always been doing, maybe with a little more responsibility,” said Koehler, Paper Machinery’s chief financial officer and treasurer.

Donald Baumgartner will continue to serve as chairman of the board of directors, with John Baumgartner remaining on the board.

“I am 85 years old, and I have been at this for over 60 years. The company is in incredibly good shape at the moment, so the timing could hardly be better,” Donald Baumgartner said.

The Baumgartners say they will remain in Milwaukee, where they are active in the arts, theater and charities.

“I have strong roots here in Milwaukee. … I care a lot about this community,” said Donald Baumgartner, who is a past president of the Milwaukee Art Museum’s board of trustees and served as chairman of the museum’s building committee during construction of the Calatrava addition.

Originally, Paper Machinery was named Milwaukee Shipbuilding Corp. because the Baumgartner family initially thought about building a business refurbishing surplus military ships. The company, however, never touched a ship, instead turning its attention to building machines that make paper cups.

Now, with employees at the helm, “The ship is on course, the weather is fair, and the fuel tanks are full,” Donald Baumgartner said.