LyondellBasell buying A. Schulman for $2.25 billion in big materials shakeup

HOUSTON—In a major global plastics materials deal, LyondellBasell Industries is acquiring A. Schulman Inc. for $2.25 billion.

LBI—based in Houston and London—is one of the world's largest producers of olefins and polyolefins, including polyethylene resins. Fairlawn, Ohio-based Schulman is a leading compounder and concentrates maker in North America and Europe and also ranks as one of Europe's largest resin distributors.

In a Feb. 15 news release, LBI officials said that the deal "builds upon LyondellBasell's existing platform in the compounding/composites/powders space to create a premier advanced polymer solutions business with broad geographic reach, leading technologies and a diverse product portfolio."

The transaction creates an industry-leading compounding business with combined sales of $4.6 billion and adjusted EBITDA of $446 million over the last 12 months, they added. The new business expects to capture $150 million in run-rate cost synergies within two years, creating significant value for shareholders.

Officials added that the deal doubles the size of LyondellBasell's existing compounding business and establishes a platform for future growth with reach into additional high-growth markets.

"The acquisition of A. Schulman is a natural extension of our current platform," LBI CEO Bob Patel said in the release. "This combination will allow us 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."

"This transaction, which provides our shareholders with a compelling, immediate cash premium, represents the culmination of a robust assessment of strategic alternatives undertaken by our Board of Directors," Joseph Gingo, Schulman chairman, president and CEO, added in the release.

The blockbuster deal caps a troubling period for Schulman, a 90-year-old firm that began as a rubber brokerage in Akron and now employs 5,100 at 54 locations worldwide.

Schulman grew quickly through acquisitions under Gingo's leadership from 2008-14. But the firm's $800 million acquisition of compounding and thermosets firm Citadel Plastics in 2015 went bad after problems arose with the quality of some materials made by some Citadel units.

Those problems led to Schulman taking a $402 million charge related to the deal in fiscal 2016. They also led to the removal of CEO Bernard Rzepka and to the return of Gingo, who had retired in 2014. Schulman had been the subject of sale rumors since completing a comprehensive review of the business with Citigroup in late 2016.

For its 2017 fiscal year ended Aug. 31, Schulman had sales of $2.46 billion, down roughly 1 percent from the prior fiscal year. Profit for fiscal 2017 came in at $34.2 million, following a loss of $356 million in 2016.

Custom concentrates and services was Schulman's largest product category in fiscal 2017, generating 46 percent of total sales. Europe/Middle East/Africa was Schulman's largest sales geography in fiscal 2017, generating 49 percent of total sales.

Schulman's financial challenges also have affected its per-share stock price. The price peaked above $48 in early 2015, but had fallen to near $26 by mid-2017. It had recovered to close near $39 on Feb. 14.