Wall Street's ongoing credit crunch has led the GS Capital Partners investment firm to withdraw its $1.1 billion offer for plastics processor Myers Industries Inc.
Akron, Ohio-based Myers confirmed in an April 4 news release that the deal between the firm and New York-based GS had been terminated. The deal originally was announced in April 2007. In December, GS - a unit of financial giant Goldman Sachs & Co. - paid a nonrefundable $35 million fee to Myers in order to extend the deal's final date to April 30.
GS had offered $22.50 per share for Myers. At the time of the original announcement, Myers' per-share stock price was around $19. It remained above $20 for most of 2007 but began a steep drop in December - losing 30 percent of its value on the day that GS announced the extension of the closing date. The price fell below $12 in January and was at $12.30 in early trading April 4.
In a phone interview, Myers investor relations director Max Barton said that the decision ``was based on GS' review and continued weakness in broader markets in which Myers operates.''
Major markets for Myers include automotive and lawn and garden. In 2007, Myers posted a profit of almost $55 million as sales climbed 18 percent to almost $920 million. But the firm also closed injection molding plants in Brampton, Ontario; Lugoff, S.C.; and Dawson Springs, Ky., eliminating almost 340 jobs in the process.
Myers had lost more than $72 million in 2006 because of a hefty loss from discontinued operations. Its 2007 profit from continuing operations was up 29 percent to almost $37 million. The firm also bought horticultural container maker ITML Horticultural Products Inc. of Brantford, Ontario, for $110 million in early 2007.
Market watchers Bill Ridenour and David Leibowitz said the deal's disintegration is mainly a credit and lending issue.
``This has nothing to do with Myers' financial performance, which has been pretty good,'' said Ridenour, president of the Polymer Transactions Inc. consulting firm in Newbury, Ohio. ``The fact that Myers failed to sell to Goldman Sachs doesn't necessarily put a black mark on the company.
``It's more of comment on the financial community. Myers is still a stable, well-run company, especially given conditions in plastics right now.''
Leibowitz, a stock analyst with Burnham Securities Inc. in New York, said that the pullout ``was based on the stock's price after GS asked for an extension and paid a penalty within one week of when the deal was supposed to close.
``The opinion makers weren't quite convinced that there was going to be a transaction,'' he said. ``Wall Street was saying that there would be a deal at a reduced price or not at all. It had very little to do with Myers in the sense of the trading price. Wall Street gave the deal two thumbs down.''
Leibowitz added that the Myers deal may have received additional attention within the financial community because it was the first proposed by GS Capital.
At Myers, Barton said it would be ``business as usual'' for the firm.
``The GS offer was a unique opportunity that the company considered,'' he added. ``We're not changing strategy.''
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 - including ITML - has in-mold labeling and the ability to do lightweight, coextruded, thermoformed pots. Myers' Ameri-Kart Corp. unit ranks as North America's 13th-largest rotational molder, according to a recent Plastics News industry ranking, with estimated annual sales of $42 million.
Myers' other segment is wholesale distribution for tools, equipment and supplies for the tire, wheel and under-vehicle service industry.