Private equity is finding investments in plastics again, this time with Goldman Sachs Group Inc. agreeing to pay $1.07 billion for Akron, Ohio-based plastics processor Myers Industries Inc.
The price translates to $22.50 per share in cash for shareholders and the assumption of $276 million in debt.
Goldman, based in New York, is acquiring Myers through GS Capital Partners, a $20 billion fund that includes $11 billion from institutional investors and wealthy individuals and $9 billion from Goldman and its employees. Goldman officials declined further comment on the transaction, which Myers announced April 24.
Myers' board of directors, armed with a unanimous recommendation from a special committee, unanimously approved the transaction, Myers officials said.
``After thorough analysis, the special committee and the board have endorsed this transaction as being in the best interests of our shareholders,'' said John Orr, Myers' president and chief executive officer, in a news release.
``We have undertaken many successful initiatives over the last two years to transform and grow,'' he said, continuing. ``After careful review of our strategic business segments and the best avenues for growth, we are excited about this opportunity.''
Mary Myers, widow of company co-founder Louis Myers, owns 11 percent of common shares; Stephen Myers, former CEO, owns 8.5 percent. The company was founded in Akron in 1933 by Louis and Meyer Myers with a $620 loan, tire-repair merchandise and a used truck.
The publicly held company's stock price during the past few weeks may have hinted that a deal was coming, said analyst David Leibowitz with New York-based Burnham Securities Inc. The stock's 52-week low has been $14.63 on the New York Stock Exchange; on April 25, it traded as high as $22.73.
``The stock had been trending higher,'' Leibowitz said in a telephone interview. ``It had been hitting all-time highs over the past few weeks. Given the stock's trading over the last few months, it appears that investors were expecting further good news. Based on the news this morning, they got it.''
Myers has been through significant changes during the past year, including divestment of its European materials-handling operations and the acquisition of container producer ITML Horticultural Products Inc. of Brantford, Ontario.
Myers' business has plastics operations in three out of four of its operating segments. Its North American materials-handling segment offers injection molding, structural foam molding, thermoforming and blow molding. In its automotive and custom segment, its technologies include coextrusion blow molding with three-dimensional capabilities and rubber-to-plastic bonding. Its lawn and garden segment, under which ITML falls, has in-mold labeling and the ability to do lightweight, coextruded, thermoformed pots. All told, those segments represented $605 million of Myers' $780 million in 2006 sales.
Its other segment is wholesale distribution for tools, equipment and supplies for the tire, wheel and under-vehicle service industry.
Throughout 2006, Myers made changes, including staff cuts, at the corporate and operations levels, and officials made investments throughout the last half of the year to move certain lawn and garden manufacturing from California to Ohio and Nevada to take advantage of lower costs and more efficient manufacturing operations, according to Myers' 2006 annual report.
One research analyst theorized that Goldman's plan is to sell off divisions, possibly including packaging plastics.
For Goldman, the sum of the parts are worth more than the whole, said Sam Nicholls, research analyst with W. Quillen Securities Inc. in New York, and at $22.50 per share, Goldman is getting a reasonable price, Nicholls said.
``It's not dirt cheap. It's a reasonable price, and they're not overpaying,'' he said.
Lawn and garden has been a drag on fundamentals during the past three quarters. Sales in that segment in 2006 were $160.2 million, a decrease of 6 percent from 2005. Income before taxes was $8.1 million, a decrease of 51 percent from 2005. The $110 million purchase of ITML Horticultural Products in January gave Myers more than 50 percent of market share in that segment.
Even though Myers can solicit bids from other interested parties during the next 45 days, the $25 million fee for terminating the deal between Myers and Goldman is ``steep enough to discourage anyone else from stepping in,'' he said.
