LyondellBasell to Acquire A. Schulman
Rotterdam-headquartered, Houston-managed olefins and polyolefins giant LyondellBasell has announced plans to acquire Akron, Ohio-based compounding specialist A. Schulman for $2.25 billion. The price represents an 8.7% premium to Schulman's closing price on Feb. 14.
The deal, which adds 54 manufacturing sites and 5,100 employees to LyondellBasell’s existing 18 sites and 1,500 workers currently engaged compounding, is the company’s largest since emerging from bankruptcy in 2010.
LyondellBasell said the acquisition will double the size of its compounding business, which it operates under the name Advanced Polymer Solutions, and will make it “a full-range compounding company." The new market heavyweight will have annual revenue of $4.6 billion and adjusted EBITDA of $446 million.
Under the terms of the transaction, LyondellBasell will purchase all of A. Schulman’s common stock for $42 per share in cash and one contingent value right per share in addition to assuming outstanding debt and certain other obligations.
In addition, the company said the contingent value rights generally will provide holders of the papers with an opportunity to receive certain net proceeds, if any are recovered, from certain ongoing litigation and government investigations relating to A. Schulman's Citadel and Lucent acquisitions.
Schulman acquired composites specialist Citadel Plastics in 2015, but irregularities at that company’s Lucent Polymers arm soon turned the deal sour. Schulman took an impairment charge and also sued the business’s sellers.
LyondellBasell is financing the takeover through cash-in-hand. CEO Bob Patel said the combination of the two compounding businesses will lead to $150 million in run-rate cost synergies within two years, and the transaction will be accretive to earnings within the first full year.
Patel called the addition of Schulman “a natural extension of our current platform.” This, he said, will allow the Houston-run company “to provide our customers with a wider range of innovative solutions while adding the ability to serve high-growth end markets beyond the automotive sector, such as packaging and consumer products, electronics and appliances, building and construction, and agriculture."
The proposed acquisition, expected to close in the second half of 2018, has been unanimously approved by the respective boards, and is subject to customary closing conditions, including regulatory approvals and approval by Schulman shareholders.
Joseph M. Gingo, CEO of A. Schulman, said the transaction, which provides his company’s shareholders with a “compelling, immediate cash premium,” represents the culmination of a robust assessment of strategic alternatives undertaken by our board of directors."
In autumn 2017, the US business newspaper Wall Street Journal, citing investment banking sources, suggested that Schulman could be up for sale. At the time, the company was carrying a debt burden of nearly $900 million. The Ohio compounder also has a small plastics distribution business. It was unclear as to whether this was part of the deal with LyondellBasell.