A. Schulman shareholders approve LyondellBasell deal

FAIRLAWN, Ohio—Shareholders in materials firm A. Schulman Inc. have approved a deal under which LyondellBasell Industries will acquire Schulman for $2.25 billion.

The vote was June 14. The transaction still needs regulatory approvals in the European Union, Russia and from the Committee on Foreign Investment in the U.S.

In a news release, Joseph Gingo, Schulman chairman, president and CEO, said that shareholders of Fairlawn-based Schulman "have solidly affirmed the value that the company's merger with LyondellBasell represents.

"This outcome serves the best interests of all our stakeholders including our customers, suppliers, employees and the communities in which we operate," he added.

When the deal is completed, Schulman stockholders will be entitled to receive $42 in cash and one contingent value right for each share of common stock. The transaction is expected to close in the third quarter of 2018.

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

The transaction would create an industry-leading compounding business with combined sales of $4.6 billion. The new business expects to capture $150 million in cost synergies within two years, creating significant value for shareholders.

The deal adds Schulman's $2.5 billion in annual sales, 54 manufacturing sites and 2.4 billion pounds of production capacity to LBI's own PP compounding unit, which has $2.1 billion in annual sales, 18 manufacturing sites and 2.5 billion pounds of production capacity.

One of the main benefits to LBI from the deal, officials have said, will be diversifying a PP compounding business that gets 90 percent of its sales from the automotive market. By comparison, Schulman's top five market segments are more varied, led by packaging with a 25 percent stake.

Combining Schulman with LBI's compounding would create a unit with 53 percent of its sales from automotive, but also with sizable chunks from packaging, electrical/electronics, building/construction and other markets.

When LBI made its offer, CEO Bob Patel described it as "a unique opportunity to acquire a company with a great long-term reputation." Schulman was founded in 1928 as a tire recapper in Akron, and later moved into plastics.

Schulman was damaged by its $800 million acquisition of Citadel Plastics, after concerns arose about the contents of some materials made by Citadel. Those concerns and issues with Citadel's thermoset plastics business led Schulman to take a $402 million charge in 2016.

In an interview with Plastics News shortly after the LBI offer was announced, Gingo said that the fraud alleged by Schulman against Citadel's former owners "was a significant factor in [Schulman's] problems paying down our debt." Gingo said.

If the Citadel deal had performed as expected, Schulman "would be continuing to grow as we did before and would be adding onto the business," he added.

A trial in which Schulman is seeking damages from Citadel's previous owners began April 16. No decision has been reached in that case, which is being heard in Delaware Chancery Court in Wilmington, Del.

Schulman employs more than 5,000 worldwide and posted sales of around $2.5 billion for its 2017 fiscal year, which ended Aug. 31.

LBI employs more than 13,000 worldwide and posted sales of almost $34.5 billion in 2017.