For the second year in a row, compounder and distributor A. Schulman Inc. has brokered a deal to avoid a proxy fight with major shareholder Barington Capital Group LP.
The two sides agreed to nominate medical-device executive Michael McManus and plastics executive Howard Curd for Schulman's board of directors. Current board members James Marlen and Ernest Novak Jr. also are on the slate, which will be presented at the firm's annual meeting Dec. 7.
New York-based Barington had proposed McManus for the 12-member board along with three other replacement candidates in an Oct. 12 news release. In that release, Barington - which controls about 10 percent of Schulman stock - said it wasn't satisfied with Schulman's financial performance.
McManus is president and chief executive officer of Misonix Inc., a maker of ultrasonic medical devices based in Farmingdale, N.Y. He also has previous experience as an executive in the financial sector and with the federal government and currently serves on the advisory board of a Barington affiliate.
Curd is chairman and CEO of Uniroyal Engineered Products LLC of Sarasota, Fla., a maker of Naugahyde-brand PVC-coated fabric.
In an Oct. 26 news release, Barington and Fairlawn, Ohio-based Schulman also agreed to establish a committee comprising directors David Birney, John Yasinsky and James Mitarotonda, to create a detailed operating budget and business plan in order to improve Schulman's operations and profitability. Mitarotonda is Barington's chairman, president and CEO.
The agreement also calls for termination of a stockholders' rights agreement between Schulman and National City Bank of Cleveland. Barington spokeswoman Patricia Sturms described the Schulman/National City agreement as an anti-takeover measure commonly referred to as a ``poison pill.''
``It's good practice, in the current corporate environment, to remove these kinds of measures,'' Sturms said in a phone interview. Sturms added that she was unsure if Barington planned to increase its stake in Schulman.
In the news release, Haines said the Schulman/Barington agreement ``serves the best interests of [Schulman] and its stockholders.'' Mitarotonda said the deal ``provides significant value for [Schulman] stockholders.''
The Schulman/Barington agreement comes shortly after Schulman announced a new annual sales record of $1.6 billion in its just-completed 2006 financial year.
Europe - including a small portion of sales from Asia - accounted for almost 70 percent of Schulman's sales and all of the firm's pretax profit in fiscal 2006. In North America, Schulman posted a pretax loss of more than $9 million as sales volume in pounds dropped 2 percent. The firm's overall sales volume in pounds was up 9 percent vs. 2006.
In the Oct. 18 conference call, Haines understandably was upbeat about the year's results.
``Our gross profit margin was up in North America as we reduced lower-margin sales,'' he said. ``We've targeted more engineering-type products and reduced costs throughout the company.
``We're going to look for inventory reduction and lower additive and freight costs in 2007, where we think we can save between $5 million and $7 million.''
But Haines admitted that Schulman is concerned about potential softness in the automotive market, which provides almost 40 percent of the firm's manufacturing sales.
``With the economy slowing in North America and with the automotive industry slowing down, we expect to sell less there,'' he said. ``Our customers' feelings are very mixed. Some say they expect to have a strong year [in 2007], but customers that make durable goods are concerned. That's what gives us heartburn.''
Schulman also is adjusting the timetable for launching its Invision-brand sheet. Haines said commercial production will begin in January on a semi-commercial line in Sharon Center, Ohio. The firm expects to book its first orders for the product - which officials have said can eliminate the need for painting of exterior auto parts - in the spring.
The company also is preparing a site in Findlay, Ohio, for construction of a plant dedicated to Invision production.
``We're a little behind schedule [on Invision] because of delays in construction of the first line and also because of the weakening of some markets,'' he said. ``But this is one of the most revolutionary ideas I've seen in plastics in the last 30 years.''