A. Schulman Inc. has avoided a proxy fight on its board of directors by agreeing to spend at least $175 million to buy back company stock and by appointing to the board the top official of the firm that had made the challenge.
In an Oct. 24 news release, officials at Fairlawn, Ohio-based Schulman - one of North America's largest compounders and resin distributors - detailed the deal the firm made with New York-based Barington Capital Group LP. Barington, a private equity firm, had acquired almost 9 percent of Schulman stock since January and had been calling for changes to improve profitability at the 77-year-old company.
James Mitarotonda, Barington's chairman, president and chief executive officer, will join the Schulman board until the firm's 2007 annual meeting. Schulman also agreed to add a board member - someone ``reasonably acceptable'' to both Schulman and Barington - in the next month. That new member will serve until 2008.
Barington previously had suggested nominating former plastics industry executives Phillip Ashkettle and Thomas Bohrer to the Schulman board. Sources close to the deal said they believed Ashkettle no longer is a candidate, but they were unsure of Bohrer's status.
Schulman also has agreed to buy back 8.75 million shares of stock at a price of no less than $20 per share. Schulman's per-share stock price had not been at that level since January; it spent most of 2005 bouncing between $16 and $19. The price was around $20.10 in early trading Oct. 28.
The buyback is open to all Schulman shareholders and equals about 30 percent of the company's total outstanding stock. A Barington spokesman said his firm ``has not made a determination'' as to whether it will participate in the buyback and reduce its stake in Schulman.
Schulman spokesman Rick Nelson said Barington ``isn't favored'' in the buyback and can participate just like other stockholders. Schulman will borrow to finance the buyback, he added, and the firm has enough borrowing capacity to do so.
The deal also calls for Schulman to work with Credit Suisse First Boston investment bank when dealing with third parties that approach Schulman with business offers. Schulman and Barington also expect to work together to create a business plan to improve Schulman's operations.
In the news release, both Mitarotonda and Schulman President and Chief Executive Officer Terry Haines said the deal is in the best interests of Schulman shareholders. Haines could not be reached for further comment.
Schulman posted sales of more than $1.4 billion in its just-completed fiscal year - the highest total in the company's 77-year history. The sales total jumped almost 16 percent over the previous year.
Profit at the compounder and distributor was up 15 percent to $32.1 million.