Barington Cos. Equity Partners LP - a New York-based investment firm with a reputation for shaking up companies it invests in - has bought a stake of more than 5 percent in leading compounder A. Schulman Inc.
In a Securities and Exchange Commission filing, Barington officials said the investment in Fairlawn, Ohio-based Schulman is ``for investment purposes only.''
But the June 6 filing also states that Barington officials will continue to meet with Schulman management to explore several ways to maximize shareholder value, including the potential sale of the company. Other possibilities mentioned in the filing include seeking board representation and proposing changes to Schulman's ownership structure or operations.
In a June 14 news release, Schulman President and Chief Executive Officer Terry Haines said Schulman officials have met with Barington executives to discuss Schulman's long-term strategy, as it has with other investors.
``We agree with Barington that our stock is an excellent value,'' Haines said in the release. ``And we are always open to meeting with investors to discuss our business and strategies.''
When reached by phone, Haines declined to make any additional comments about the investment.
Since 2002, Barington and founder Jim Mitarotonda have been involved in battles to gain control of four Internet businesses - music providers Musicmaker.com and Liquid Audio, domain name registry Register.com and testing services firm Keynote Systems Inc. - as well as footwear retailer Pic-Way Shoes. The Liquid Audio and Pic-Way scenarios ended in proxy fights.
But in a June 16 telephone interview, Barington research analyst Dianne McKeever characterized proxy fights as ``a last resort'' for the firm's investments.
``We prefer to work proactively and constructively with management,'' McKeever said. ``The main similarity in all of our investments is that they all have strong balance sheets and trade at big discounts to asset value. That's what the attraction is with Schulman. The company is very undervalued.''
Schulman ``has good cash flow and a strong dividend, and has almost no net debt when you back out sales,'' she added.
Barington controls about $150 million in assets, typically investing in 10-15 companies at any given time. In the Schulman deal, Barington co-invested with Ramius Capital Group of New York, a $5 billion investment firm.
Although Schulman is Barington's first investment in the plastics and chemicals sector, the firm has had various industrial holdings, including ones in apparel wholesaling and textile production, McKeever said.
Schulman ranks as one of North America's five largest compounders, according to a Plastics News estimate. The firm employs 2,400 at 14 sites worldwide. In the first half of its 2005 fiscal year, which ended Feb. 28, Schulman posted pretax profit of $26.5 million and sales of $713 million. The pretax profit was flat from a year ago. Sales were up 21 percent.
On Wall Street, Barington's interest has had an apparent impact on Schulman's stock price. Since June 7, the firm's per-share price has climbed from $16.45 to a June 16 close of $18.77 - a jump of more than 14 percent.