Lyondell to acquire Schulman for $2.25bn

April 2018 | DEALFRONT | MERGERS & ACQUISITIONS

Financier Worldwide Magazine

April 2018 Issue

In a $2.25bn transaction which creates an industry-leading compounding business, LyondellBasell, one of the largest plastics, chemicals and refining companies in the world, is to acquire A. Schulman, Inc., a leading global supplier of high-performance plastic compounds, composites and powders. The acquisition builds upon LyondellBasell’s existing platform in this space to create a premier advanced polymer solutions business with broad geographic reach, leading technologies and a diverse product portfolio.

Under the terms of the agreement, LyondellBasell will purchase 100 percent of A. Schulman common stock for $42 per share in cash and one contingent value right per share and assume outstanding debt and certain other obligations. In addition, the contingent value rights generally will provide a holder 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.

Using cash-on-hand to finance the acquisition, LyondellBasell expects to achieve $150m in run-rate cost synergies within two years, primarily by leveraging its well-established approach to cost discipline and productivity, as well as its culture of operational, business and commercial excellence. Furthermore, the acquisition is expected to be accretive to earnings within the first full year following close.

With products sold in approximately 100 countries and recognised as the world’s largest licensor of polyolefin technologies, LyondellBasell’s acquisition of A. Schulman, which employs approximately 5100 people and has 54 manufacturing facilities globally, doubles the size of its existing compounding business and establishes a platform for LyondellBasell’s future growth into additional high-growth markets.

“The acquisition of A. Schulman is a natural extension of our current platform,” said Bob Patel, chief executive officer of LyondellBasell. “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, such as packaging and consumer products, electronics and appliances, building and construction and agriculture. By leveraging our proven approach to operational, commercial and business excellence, the combined business will create significant value for our shareholders and customers.”

The combined businesses had revenues of $4.6bn and adjusted earnings before interest, taxes, depreciation and amortisation (EBITDA) of $446m over the last 12 months.

“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,” said Joseph M. Gingo, chairman, president and chief executive of A. Schulman, Inc. “We are delighted to join forces with LyondellBasell, an industry leader we have admired for many years. With LyondellBasell’s scale and resources and its commitment to meeting customers’ demanding requirements, we also expect this combination to create significant opportunities for A. Schulman employees, whose professionalism and expertise will be integral to advancing LyondellBasell’s vision, values and commitment to making a positive global impact.”

Serving as LyondellBasell’s legal counsel is Shearman & Sterling LLP, while J.P. Morgan and Dyal Co. are serving as co-financial advisers. Skadden, Arps, Slate, Meagher & Flom LLP is serving as A. Schulman’s legal counsel, while Citigroup Global Markets, Inc. is serving as financial adviser.

The proposed acquisition, which has been unanimously approved by the respective boards of LyondellBasell and A. Schulman, is subject to customary closing conditions, including regulatory approvals and approval by A. Schulman shareholders. The acquisition is expected to close in the second half of 2018.

Mr Gingo concluded: “The combined business will be better positioned to address a broader range of customer needs by integrating across applications and offering customers a wider range of solutions in attractive and growing markets.”

Fraser Tennant