FAIRLAWN, OHIO (Updated Aug. 24, 2:50 p.m. ET) — A. Schulman Inc. is continuing its buying spree and also has reached an agreement to sell an Ohio plant.
The Fairlawn-based compounder and distributor said Aug. 20 it has signed a definitive agreement to acquire ECM Plastics Inc., a privately owned plastics compounder in Worcester, Mass., for $36.5 million. It also announced the sale of its PVC compounding plant in Bellevue, Ohio, to a subsidiary of Mitsubishi Chemical Corp.
ECM employs 140 and generates about $40 million in annual sales. The firm operates nine twin-screw extrusion lines and one single-screw line at a 120,000-square-foot plant, making custom compounds and color and additive concentrates based on most major commodity and engineering resins. The transaction is expected to close in early September.
The ECM deal is the sixth acquisition in less than three years for Schulman, which ranks as one of North America's 30 largest compounders and concentrate makers. Most recently, Schulman in January paid $63 million for specialty color concentrate maker Elian SAS of Oyonnax, France.
“With ECM's expertise in custom color matching, higher-value compounding and specialty additive formulations, we believe they are an excellent strategic fit as we continue to focus on niche products,” said Joseph Gingo, Schulman chairman, president and CEO.
Gustavo Perez, general manager and chief operating officer of the Americas for Schulman, said the acquisition of ECM “will expand our capabilities in a number of markets, especially personal care and cosmetics, where ECM has a strong presence.”
In an Aug. 22 phone interview, Gingo added that Schulman and ECM hadn't competed against each other much, even though they make similar products. Adding materials in the cosmetics and personal-care sectors “will allow us to sell a whole portfolio,” he said. “With these products from ECM, we now can do a sell-through of our whites and engineering plastics.”
ECM President Wayne Marquis and partners Mike Madden, John Coz and Randy Youngsma founded the firm in 1996. Marquis, Coz and Youngsma will remain after the sale to Schulman. Madden passed away in 2010. The four had worked together for more than a decade at Coz Plastics, a Northbridge, Mass.-based compounder founded by Coz's father, Henry. They launched ECM by purchasing the three-line compounding unit of American Polymers Inc., a materials supplier in Oxford, Mass.
ECM added its ninth twin-screw line last year in a move that increased its production capacity by 15 percent. Annual capacity now stands at between 20 million and 25 million pounds. Cosmetics/personal care is the firm's largest end market, generating 25-30 percent of sales.
ECM also last year leased 48,000 square feet of warehousing space in nearby Clinton, Mass. ECM also may use the Clinton site for blending or pulverizing work in the future. It already had been leasing 50,000 square feet of warehousing space at an adjacent building in Worcester.
In an Aug. 23 phone interview, Marquis said Madden's death in 2010 led to the other ECM partners thinking about what the next step for the business should be.
“There's not really a second generation to take over the company,” he said. “And when something like [Madden's death] happens, it makes you look at things a little bit. Things can change suddenly.
“We also had a fair number of customers looking for global supply,” Marquis added. “We'd done a good job of bringing the company to this point. But to bring it further, it helps to have global reach.”
ECM began to seek out a buyer more than a year ago. “We started to look around and see what other opportunities were out there,” Marquis said. “We were looking for someone to continue the business along the same lines.
“We're pleased to pass the torch to a company like Schulman.”
Polymer Transaction Advisors Inc. of Newbury, Ohio, advised ECM on the deal. PTA President Bill Ridneour said he “was pleased to advise on a transaction between two parties who have such a strong business and cultural fit.”
“ECM's location, high-value-added concentrate and compounding business and strong management and technical team will enable Schulman to accelerate its own growth into these higher-value-added products,” he added. “This is a great example of buyer and seller playing to each other's complementary strengths.”
The deal marks Schulman's first U.S. acquisition since early 2010, when it bought compounder ICO Inc. of Houston and color concentrates maker McCann Color Inc. of North Canton, Ohio. Since then, the firm has made acquisitions in São Paulo (compounder and concentrates maker Mash Compostos Plásticos) and Santiago, Argentina (a majority stake in rotational molding powders maker Surplast SA), as well as Elian in France.
Schulman spent almost $300 million on those five purchases. The firm also spent $14 million earlier this year to form a joint venture with Saudi Arabian firm National Petrochemical Industrial Co. to build a polypropylene compounding plant in Yanbu, Saudi Arabia.
Gingo said the U.S. remains an important market for Schulman.
“We came close to doing a few more deals in the U.S., but could not agree on the selling price,” he said. “One of the things we've wanted to do since I came on as CEO is to make the U.S. look more like our European and Mexican operations, which were profitable.”
In that area, Gingo has been successful. Schulman's U.S. operations posted an operating loss in 2007, but have contributed 22 percent of the firm's operating income so far in its 2012 fiscal year.
The sale of the Bellevue plant to Mitsubishi Chemical Performance Polymers Inc. in Greer, S.C., means Schulman has sold off all five of its “legacy plants” that mainly had been doing volume automotive work when Gingo took the helm. Since then, Schulman has exited that work to focus on the higher-margin color and engineered plastics markets.
Terms of the sale of the 80-employee Bellevue plant were not disclosed; however, Schulman said it will not incur any significant gain or loss on the sale. Schulman had been toll-producing PVC-based compounds for Mitsubishi there, as well as compounds based on thermoplastic elastomers for its own product mix.
Last year, Schulman and Mitsubishi dissolved Sunprene Co., a PVC-related joint venture between the two firms that had been in operation since 1988. Mitsubishi now will toll-produce TPE compounds for Schulman at the Bellevue site.