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May 15, 2000 02:00 AM

Competitors react to merger

Frank Esposito
Senior Staff Reporter
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    The proposed megamerger of Geon Co. and M.A. Hanna Co. came as somewhat of a surprise to their competitors, many of whom still were attempting to analyze the deal's impact in the days after the May 8 announcement. Officials at Ampacet Corp. of Tarrytown, N.Y., and Clariant Masterbatches of Easton, Md. — the firms that rank second and third behind Hanna in the U.S. color compounds and concentrates market — each said their firms would not be affected much by the deal. Neither does much business in the PVC compound market, which is dominated by Geon.

    "We'll have to wait and see if it's good for those companies," said Robert Fielding, senior vice president of Masterbatches-Americas for Clariant. "I'm still trying to understand [the deal's] strategic value."

    He also questioned the usefulness of creating a multipolymer compounding lineup of PVC, polyolefins and engineeering resins. Geon identified offering such a lineup as one of its goals.

    "We're providing colors, effects and functionality," Fielding said. "We don't view [a multipolymer menu] as a critical success factor."

    The only synergy from the deal that was immediately apparent to Ampacet President Robert DeFalco is in the wire and cable market, where the combined firm would hold positions in PVC and polyolefin-based compounds.

    "Beyond [wire and cable], it looked like Hanna was trying to make something happen," DeFalco said. "They appeared to be having problems taking advantage of their size."

    A. Schulman Inc., the Fairlawn, Ohio, compounder that ranks fourth in the U.S. compounding market, had been mentioned numerous times in the same category as Hanna as a potential acquisition or merger candidate.

    Schulman posted sales of $985 million in 1999, but has seen its stock price drop from $20 per share to less than $13 since July.

    Terry Haines, Schulman president and chief executive officer, declined to comment on specific aspects of the Geon/Hanna deal, but said it "doesn't necessarily precipitate more merger activity."

    Such action "depends on what part of the industry you're in and what technology you have," Haines said.

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