Kraton and and LCY expected to renegotiate merger deal

By Frank Esposito
Senior Staff Reporter

Published: July 2, 2014 2:26 pm ET
Updated: July 2, 2014 5:17 pm ET

Related to this story

Topics Materials, Mergers & Acquisitions, Materials Suppliers
Companies & Associations Kraton Polymers LLC, Houston

Materials firms Kraton Performance Polymers and LCY Chemical Corp. are expected to renegotiate the terms of a merger that would have given LCY a 50 percent stake in Kraton.

Terms of the deal are expected to change as a result of poor first-half results at the styrenic block copolymers unit of Taipei, Taiwan-based LCY. That business saw first-half pretax profit fall 80 percent to less than $3 million, as a result of lower demand growth and overcapacity for the material, mainly in China.

Kraton President and CEO Kevin Fogarty discussed these results in a presentation on June 24, saying that Kraton’s adjusted pretax profit forecasts for the LCY business could be delayed by up to two years. He added that Kraton — a major SBC maker — expects these factors to ease in the second half of 2014 as China returns to traditional GDP growth rates.

That disclosure, however, sent Houston-based Kraton’s per-share stock price down 14 percent — from more than $25 to less than $22 — by the end of the day. As a result, Kraton’s board of directors announced June 30 that it would withdraw its recommendation that shareholders approve the previously announced agreement. LCY has five business days from that date to respond.

Officials with both firms, however, said they still expect the merger to take place.

“At the end of the day, both parties still want to do the deal,” Kraton investor relations director Gene Shiels said in a July 2 phone interview. “We still want to do the transaction, but the terms probably will change.”

Shiels added that Kraton had not yet filed an amended proxy document that would have set a date for a shareholder vote. The date for that vote now will be dependent on the duration of negotiations between Kraton and LCY.

In the July 2 edition of the Taipei Times newspaper, LCY officials said that they will enter talks with Kraton and will possibly revise terms of the deal. LCY spokeswoman Abby Pan told the Times that her firm would try to learn more about Kraton’s concerns and respond to them in the interest of LCY’s shareholders.

The combined firm is expected to have annual sales of more than $2 billion. SBC is the largest of LCY’s seven units. That business had sales of $612 million in the year ended Sept. 30.

Industry consultant Robert Eller — president of Robert Eller Associates in Akron, Ohio — said that he wasn’t surprised by the challenges facing the Kraton/LCY deal because of SBC overcapacity in Asia.

“The deal is still worth pursuing,” Eller said. “But there are a lot of questions on the table.”


Comments

Kraton and and LCY expected to renegotiate merger deal

By Frank Esposito
Senior Staff Reporter

Published: July 2, 2014 2:26 pm ET
Updated: July 2, 2014 5:17 pm ET

Post Your Comments


Back to story


More stories

Image

Ukraine's Group DF may be forced to sell Crimea-based additives plant

July 28, 2014 10:12 am ET

Group DF, the industrial business of Ukrainian tycoon Dmitry Firtash, may be forced to sell off Eastern Europe's biggest producer of titanium oxide,...    More

Image

DuPont resins help take Nike golf balls 'Fore!'ward

July 25, 2014 1:07 pm ET

It may be difficult to imagine just how much science, not to mention rubber and plastic components, go into a golf ball. But global giant DuPont Co....    More

Image

Bioplastics maker wins government funding

July 25, 2014 12:13 pm ET

Canadian bioplastics maker Solegear Bioplastics Inc. has won $1.6 million in funding from the government-sponsored Western Innovation Initiative...    More

Image

Tooling Technology has new private equity owner

July 25, 2014 11:55 am ET

New York private equity firm GenNx360 Capital Partners has partnered with management to buy Tooling Technology Holdings LLC, a diversified Ohio-based ...    More

Image

Report: biodegradeable plastics use in Europe to grow 12 percent

July 25, 2014 10:25 am ET

The biodegradable plastics market in Europe is forecast to witness 12 percent compound growth during 2014-19, according to TechSci Research's “E...    More

Market Reports

Plastics Recyclers Data Report & Directory

This exclusive MS Excel database contains all the companies from Plastics News' ranking of top North American Recyclers and Brokers by reprocessed volume and also includes a directory with materials processes, services offered and company contact information. Data is based on primary research by PN editorial staff.

Learn more

2014 Injection Molding Industry Report

GROWTH, OPPORTUNITY IN SIGHT FOR INJECTION MOLDERS IN 2014

In the wake of the economic turbulence earlier in this decade, molders today find themselves in much better shape. Molders are gaining a competitive advantage by investing in people, equipment and seeking inroads into new markets on a global scale.

Growth in the injection molding industry is going to be driven by low financing costs and a continued move to reshore some business.

Learn more

Shale Gas Market - Analysis of North American Region

This report highlights the impact of shale-based natural gas on the North American plastics market and features an in-depth analysis of production trends in the United States during 2013 and a forecast for 2014 and beyond.

Learn more

Upcoming Plastics News Events

September 10, 2014 - September 12, 2014Plastics Caps & Closures 2014

January 14, 2015 - January 14, 2015Plastics in Automotive

February 4, 2015 - February 6, 2015Plastics News Executive Forum 2015

More Events