(Feb. 1, 2008) — After flying under the radar for several years, compounder A. Schulman Inc. has been noticed quite a bit lately. That's not necessarily a good thing for the Fairlawn, Ohio-based firm.
Schulman has faced shareholder revolts for three consecutive years now. As a result, the firm finds itself with a board of directors composed of three distinct factions: Longtime board members, members supplied by major shareholder Barington Capital Group LP and members supplied by major shareholder Ramius Capital Group LLC.
(For those keeping score at home, Barington was viewed as the devil in the shareholder revolts of 2005 and 2006, but joined the ranks of the angels in 2007 when it sided with Schulman management in a battle with Ramius.)
How does a lightly traded, 80-year-old public company arrive at this complicated state?
Well, for starters, the firm grew in a lopsided fashion, allowing its European operations to greatly outdistance its North American arm. Schulman's fiscal 2007 European sales — including a small amount in Asia — accounted for almost 75 percent of the firm's total. The split occurred partly because the European side focused on packaging, while the North American unit placed its bets on automotive — a move that's really hurt recently.
Schulman has been fairly inactive on the growth front. Of course, there's a faction within the compounding market — and probably in Schulman's executive ranks — that will say Schulman did the right thing by not plunging into a bevy of deals in recent years.
Schulman also wasn't able to produce profit to match its peer group on Wall Street. And though Schulman has been profitable in each of the past five years, and has produced record sales numbers, that hasn't been enough to placate the investment community.
So where does that leave Schulman?
Ramius and Barington — which, combined, own more than 15 percent of Schulman — aren't likely to be content with the “exploring of options” discussions that have been going on in some form since 2005. But at the same time, there aren't a whole lot of buyers lined up for a plastics firm that uses a lot of petrochemical-based commodity material and that's affected by the automotive and construction markets.
For now, Schulman's customers and competitors will watch the moves of the global compounding player with great interest. At the end of what's becoming a long series of days for Schulman, the causes and effects of the firm's unrest will touch a lot of companies on both the resin-making and processing sides of the fence.
Esposito is an Akron, Ohio-based
Esposito is an Akron, Ohio-basedPlastics News senior reporter.