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A. Schulman urges Ferro to reconsider takeover offer

By: Frank Esposito

April 22, 2013

FAIRLAWN, OHIO — The battle of words continues in A. Schulman Inc.'s bid to acquire Ferro Corp.

Ferro's board of directors released a letter to its shareholders on April 18, urging them to vote for three board-approved candidates at the firm's May 15 annual meeting — and not for candidates recommended by shareholders FrontFour Capital Group and Quinpario Partners LLC.

FrontFour and Quinpario had released their own letter to Ferro shareholders on that same date, criticizing Ferro management and asking shareholders to "fully explore strategic alternatives, including engaging with A. Schulman."

Fairlawn-based Schulman — a leading global compounder — had made a March 4 offer to acquire Mayfield Heights, Ohio-based Ferro for $6.50 per share in a deal with a total value of $855 million.

But in the April 18 letter, the Ferro board — in an all-caps message — said: "Don't be misled into disrupting the momentum of our strategy or accepting a low-ball acquisition proposal."

The board added in the letter that FrontFour/Quinpario "has offered no specific plan of action or productive suggestions regarding Ferro's strategy." Stamford, Conn.-based FrontFour and St. Louis-based Quinpario combined hold about 4 percent of Ferro stock.

Schulman added to the mix on April 23 with a news release in which officials said that their firm's offer for Ferro "is not a 'low-ball' offer."

"We have been and continue to be disappointed by the Ferro board's refusal to talk, evidently driven by their stated desire to 'stay independent,'" said Schulman Chairman, President and CEO Joseph Gingo.

Schulman officials repeated their $6.50 per-share offer, saying it was at least 21 percent above Ferro's 30, 60, 90 and 180-day volume-weighted average prices before March 4. Ferro's per-share stock price was at $5.20 on March 1 before jumping as a result of the Schulman bid. It was at $6.80 in late trading April 22. The price had bottomed out near $2.50 in late 2012.

Ferro responded late on April 22 with statement saying that its board "carefully considered A. Schulman's unsolicited proposal and unanimously determined that it was inadequate and not in the best interests of Ferro shareholders." The company added that Ferro's board and management team "believe that the continued execution of the company's value creation strategy will deliver greater value to Ferro shareholders."

Ferro generates about 30 percent of its annual sales from plastic-related businesses, including polypropylene compounding. Schulman posted sales of just over $2.1 billion in its 2012 fiscal year, which ended Aug. 31. A combined Schulman-Ferro would have annual sales of almost $4 billion and would employ more than 8,000 worldwide.