The battle for ICO Inc. is just about over, with investment firm Travis Street Partners LLC ousting the Pacholder family. Travis Street now plans to take the Houston-based compounder private if its buyout offer is approved later this year.
``As dissident slates go, it was Reagan-Mondale,'' said Travis Street's Chris O'Sullivan, who now is serving as ICO's chief financial officer. ``We received overwhelming support at the shareholder's meeting. Our candidates were elected to the board by a 4-to-1 margin.''
That mid-May meeting set off a series of events that saw the Pacholders - who had operated ICO for at least 15 years - form PBG Acquisition Corp. and offer to buy ICO for $3 per share, 35 cents more than the amount of Travis Street's most recent offer.
Travis Street quickly responded by increasing its offer to $3.10 per share. Shortly afterward, ICO Chief Executive Officer Al Pacholder contacted Travis Street officials, informing them that he and his wife Sylvia - along with their son, daughter and son-in-law - were prepared to resign their positions with the firm. After arranging a termination agreement worth more than $10 million, the Pacholders resigned June 7.
Al Pacholder could not be reached for comment.
Travis Street's offer now will be reviewed by an ICO committee consisting of shareholders with no ties to either Travis Street or the Pacholders. Given the circumstances, it is expected that deal will be approved, with Travis Street acquiring ICO for around $280 million.
Prior to that, Travis Street will try to complete the sale of ICO's oilfield services business to Varco International Inc., a competing firm based in Orange, Calif. The Pacholders had initiated that sale, but Travis Street wants to change it from an asset sale to a stock sale. Doing so will save ICO about $30 million in taxes, O'Sullivan said.
Although oilfield services accounted for about one-third of ICO's $325 million sales total last year, O'Sullivan said the business never really fit with its plastic compounding side.
``The businesses had nothing to do with each other,'' O'Sullivan said. ``You might as well be running a shoe company with a microchip maker. Management had said the businesses were countercyclical and they'd work to balance out earnings. That's true to some extent but not enough to justify keeping them together.''
Going private also seems an obvious choice to O'Sullivan.
``The polymer business alone isn't really big enough to run in public markets,'' he said. ``And micro-cap stocks really aren't big enough for most investors.''
ICO's recent stock history would seem to bear that out. Its per-share price peaked at about $8 in mid-1997 but slid below $2 in early 1999 and stood at $2.58 July 17.
The new ICO - with a base in grinding, toll compounding and proprietary compounding - then would go forward as a privately held compounder with more than 1,600 employees at sites in the United States, Europe and Southeast Asia.
O'Sullivan said that neither he nor ICO's new CEO Tim Gollin, another Travis Street investor, had planned any significant changes for the firm, but O'Sullivan admitted that they had ``a lot of work to do.''
``The whole industry's in a trough right now, but ICO has its own set of problems,'' O'Sullivan said. ``We've lost a lot of talented people, and now we need to pull some of them back in.''
ICO's new management already has been successful in getting former ICO executive Joe Moore to return to the fold. Moore will serve as general manager of ICO's Wedco USA compounding division.
The firm also is looking into naming a separate general manager of its European business - which generates half of total sales - and into reviving its unprofitable Italian locations.
Once things settle down, new management will cast an eye toward acquisitions and more proprietary products. O'Sullivan and Gollin hope to have their own replacements in place by the end of the year, but O'Sullivan said Travis Street will run the business for ``at least five years'' before it will consider selling it.
New management also plans to discontinue ICO's use of three residential properties that the Pacholders had leased in England, including houses in Northampton and Pattishall and an apartment in London. During the proxy fight, Travis Street had requested expense reports concerning the Pacholders' use of the properties.
