JLM Industries Inc.'s founder and one of its largest shareholders are taking the firm private in a deal valued at $7.4 million.
JLMI Holdings LLC, an investment group put together by JLM founder John Macdonald and shareholder Philip Sassower, will pay $1.40 per share for each of the roughly 5.3 million shares owned by other investors. The group already owns 4.5 million shares, or about 46 percent of the total.
A JLM-appointed committee reviewed the offer - which was submitted in late June - and decided it was in the best interest of nonaffiliated stockholders, officials said in an Oct. 30 news release. Financial adviser B&T Capital Markets assisted in the review.
The deal still needs to be approved by a majority of shareholders outside of JLMI Holdings, according to JLM Chief Financial Officer Michael Molina. A vote will be taken at a special meeting in January.
``The vote isn't just a formality, but internally we think [going private] is best for the company,'' Molina said by phone Nov. 5.
Tampa, Fla.-based JLM distributes engineering resins and specialty chemicals, and produces plastic feedstocks phenol and acetone.
As part of the deal, Macdonald, who launched the firm in 1986, will receive about $700,000 for selling 509,000 shares he owns individually. No management changes will result from the JLMI Holdings offer, Molina said.
JLM officials previously had said that the high cost of remaining public spurred interest in taking the firm private.
The company's annual compliance costs were about $750,000, an amount Molina called ``fairly significant'' in light of JLM's recent financial struggles.
The Sarbanes-Oxley Act of 2002 - an Enron-inspired act that increased requirements for corporate governance, financial disclosure and public accounting - magnified JLM's expenses in those areas.
``A lot of small companies are thinking about going private,'' he said. ``Sarbanes-Oxley turned up the heat, but we were already incurring significant costs.''
The Nasdaq stock exchange also threatened JLM with delisting twice in the past three years after JLM's per-share price dropped below Nasdaq's $1 minimum. JLM stock was trading at around $1.15 per share when the privatizing offer was made in late June. It was trading Nov. 5 at $1.37.
In the first half of 2003, JLM lost $2 million even as sales grew 28 percent to $139.7 million, compared with the same period in 2002. By comparison, JLM had lost $7.8 million in the first half of 2002.
Officials have cited general economic softness and downturns in selling prices for acetone and phenol as reasons for the firm's financial struggles.
JLM enforced major job cuts in 2001 and 2002 and now has 175 employees worldwide.