ORLANDO, FLA. — The $800 million match of materials maker A. Schulman Inc. and Citadel Plastics felt good from the start.
“Everything in our first meetings showed that it was a good fit culturally,” Schulman CEO Bernard Rzepka said at NPE 2015 in Orlando. “And as we went on, it made more sense.”
The deal was announced March 16, a week before the show. It nearly doubles U.S. sales for Fairlawn, Ohio-based Schulman. Citadel of West Chicago, Ill., posted sales of $550 million in 2014. The firm employs 1,200 at 21 plants, including 17 in North America.
Citadel generated 55 percent of its 2014 sales from its Engineered Plastics division — primarily compounding — and the remainder from Thermoset Composites. Its 2014 sales total was up almost 5 percent vs. 2013.
At NPE 2015, Citadel CEO Mike Huff explained how Citadel — which was built from several acquisitions beginning in 2007 — made its combination of thermoplastic compounds and thermoset composites work. Many in the industry had thought those two platforms to be incompatible.
“They meshed well, but from my 30 years in the plastics market, I had a question mark at first,” Huff said. “What happened was we had a lot of customers who had a need for both thermoplastic and thermoset materials. They just weren't using them yet.
“When we looked at their applications, we saw that some thermoplastics users could use thermosets, and the other way around. The trick was in finding the right applications. For example, we had a composites customer making large outdoor parts that we were able to switch into thermoplastics.
“We had to do some convincing,” Huff added. “But ultimately half of our sales went into overlap markets where customers were buying both.”
The deal also likely will result in some plant closings, although no details have been released as of yet. Even before the deal, Schulman had announced the closing of a plant in Stryker, Ohio. The combined company has a heavy concentration of eight plants in Evansville, Ind.
“If you have overcapacity, you have to cut down,” Rzepka said. “You have to increase productivity and take out inefficient operations. If you have an extruder that's 20 years old, it's not going to be as good as a new one.”
For Schulman, the deal is the 11th acquisition or joint venture in less than six years, but is by far the largest. The firm spent less than $600 million combined on the previous 10 deals, with the largest being its 2010 acquisition of ICO Inc. for almost $200 million.
A stronger U.S. presence also will allow Schulman to pursue business it might not have been able to get before. Previously, the firm's manufacturing presence was over-weighted in Europe, even though it's always been a U.S.-based firm.
“If we're talking to a big global player like Procter & Gamble, we now can say we're a big global player,” Rzepka said.