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

Oxford Polymers adds compounding capacity

January 30, 2015 1:16 pm ET

Materials maker Oxford Polymers has increased its compounding capacity by installing a new single-screw extrusion line.    More

Image

Marval's next generation expands capacity

January 30, 2015 1:27 pm ET

MAMARONECK, N.Y. — There’s a lot of history at Marval Industries Inc., but the 59-year-old compounding firm also is looking toward the...    More

Image

French investment firm buys Alabama-based CSP Technologies

January 30, 2015 1:10 pm ET

A French investment firm has finalized a deal to buy CSP Technologies Inc., an Auburn, Ala., company that makes specialty plastics packaging.    More

Image

Lubrizol buys Brazil-based coatings technology manufacturer

January 30, 2015 11:50 am ET

Specialty chemicals company Lubrizol Corp. of Wickliffe, Ohio, said it has acquired a Brazilian company that makes coatings technology for products...    More

Image

2014 sees modest sales increase, but profit decrease, for Dow Chemical

January 29, 2015 4:20 pm ET

UPDATED — Dow Chemical Co. delivered modest sales growth in 2014, but the firm's profit took a tumble.    More

Market Reports

Plastics in Automotive: Innovation & Emerging Trends

This special report newly released by PN and sponsored by The Conair Group examines current trends in the use of plastics in automotive, materials innovations and the changing landscape. It includes a review of legislative/regulatory activity impacting vehicle development and lightweighting, market opportunities & challenges for mold and toolmakers, innovative design strategies being implemented by major OEMs and suppliers, as well as a review of key indicators in Canada, Mexico, Brazil and China.

Learn more

Plastics Recycling Trends in North America

This report is a review and analysis of the North American Plastics Recycling Industry, including key trends and statistics based on 2013 performance. We examine market environment factors, regulatory issues, industry challenges, key drivers and emerging trends in post-consumer and post-industrial recycling.

Learn more

Injection Molding Market Analysis & Processor Rankings

Plastics News BUNDLED package contains our in-depth Market Analysis of the Injection Molding segment. You will gain keen insight on current trends and our economic outlook.

As a BONUS this includes PN's updated 2014 database of North American Injection Molders RANKED by sales volume. Sort, merge, mail & prospect by end market, materials processed, region, # of plants and more.

Learn more

Upcoming Plastics News Events

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

June 2, 2015 - June 3, 2015Plastics Financial Summit - Chicago 2015

September 16, 2015 - September 18, 2015Plastics Caps & Closures - September 2015

More Events