A Houston-based investment firm is turning up the heat on plastics and oil-field service provider ICO Inc., threatening a proxy fight to gain control of the company after ICO management rejected a Dec. 20 buyout bid.
Travis Street Partners LLC offered $2.85 per share for Houston-based ICO, which owns plastics compounders Wedco Inc. and Bayshore Industrial Inc. in addition to being a major provider of powdered resins used in rotational molding.
The offer was 82 percent more than ICO's Dec. 20 closing price. Asher Pacholder, ICO chairman and chief financial officer, responded in a Dec. 22 letter by saying the offer would be "inconsistent" with ICO management's goal of building value for shareholders.
Travis Street began acquiring ICO shares in mid-2000 and now owns just over 5 percent of the company. In a Jan. 3 telephone interview, Travis Street manager Timothy Gollin said ICO is "an attractive opportunity that we think is undervalued."
Travis Street's investors "don't think current [ICO] management has done everything it could to maximize the value of the business," Gollin added. As a result, Travis Street plans to nominate a new board of directors for ICO at the firm's annual meeting in March.
ICO posted sales of $325.3 million in its 2000 fiscal year, which ended Sept. 30, a jump of about 24 percent over 1999. Petrochemical processing — including compounding, grinding, jet milling, blending and distribution — accounted for about two-thirds of ICO's 2000 sales, with the rest coming from oil-field services.
ICO also rang up $2.5 million in profit in 2000 after losing $19.7 million in 1999. Its stock price has not fared as well, however, standing at $6 in early 1998, but dropping below $2 in early 1999 and staying in that range since then.
The firm employs about 2,200 and operates six petrochemical processing plants in the United States, seven in Europe and three in Southeast Asia.
In their Dec. 20 proposal, Travis Street officials said they would be interested in acquiring ICO's oil-fields unit if a deal can't be reached for the whole company.
"We value both parts of the company," Travis Street's Gollin said. "We just don't know if they belong under the same roof."
In compounding, ICO primarily serves as a toll compounder to major resin makers. Its biggest plastics customer is Dow Chemical Co., which accounted for 14 percent — about $31 million — of its petrochemical processing sales in 2000.
ICO's Wedco unit operates plastics-related plants in Asbury, N.J.; Grand Junction, Tenn.; China and Lovelady, Texas; Medina, Ohio; East Chicago, Ind.; and Fontana, Calif. Its Bayshore Industrial unit produces color concentrates and other specialty compounds in La Porte, Texas.
ICO management could not be reached Jan. 3 for further comment. In his Dec. 22 response to Travis Street, ICO's Pacholder described the threatened proxy fight as "costly and disruptive."