The market for mergers and acquisitions involving plastics materials firms remained a strong one in 2017, and a big compounding deal might be on the agenda for 2018.
The number of global resin, color and compounding deals increased 12 percent in 2017, growing from 43 to 48, according to P&M Corporate Finance LLC in Southfield, Mich.
The largest materials deal of the second half came in September when global chemicals firm BASF SE of Germany paid $1.9 billion for the global nylon business of Solvay of Belgium. That unit has annual sales of almost $1.6 billion and employs nearly 2,400 globally at 12 production sites, four research locations and 10 technical support centers.
In other noteworthy second-half materials deals:
• Arsenal Capital Partners bought compounding firms Carolina Color Corp. and Breen Color Concentrates LLC. Both U.S.-based firms make color concentrates for a wide range of industries. The two firms have combined annual sales of around $150 million. New York-based Arsenal now has made 24 plastics-related acquisitions since 2012.
• North American compounding leader PolyOne Corp. made another deal when it acquired Mesa Industries Inc. Avon lake, Ohio-based PolyOne in the first half had purchased Rutland Holding Co., a maker of plastisol compounds and printing inks. The firm spent a total of $143 million in those two deals, which officials said would add $75 million to PolyOne's annual sales.
• Aurora Plastics LLC of Streetsboro, Ohio, a unit of Chicago private equity firm Wind Point Partners, kept its acquisition streak going by acquiring compounder S&E Specialty Polymers of Lunenburg, Mass., for an undisclosed price. The firm in the first half had purchased Reinier Plastics of Quebec.
But the big fish in the materials ocean remains A. Schulman Inc. of Fairlawn, Ohio, which ranks as a leading compounder and concentrates maker both in North America and Europe and as one of Europe's leading resin distributors as well.
Rumors that Schulman was up for sale had been swirling in the market and appeared in The Wall Street Journal in October. The firm on Aug. 31 wrapped up a challenging fiscal year in which sales were roughly flat at just under $2.5 billion as it returned to a profit.
Schulman has struggled with the fallout from its troubled 2015 acquisition of Citadel Plastics. Schulman has filed a lawsuit against Citadel's former owners for alleged fraudulent activity.
Schulman has been the subject of sale rumors since completing a comprehensive review of the business with Citigroup in late 2016. Several financial pros contacted by Plastics News said that a buyer for Schulman most likely would come from the private equity market.
"I don't see a resin company buying Schulman," said Phil Karig, managing director of Mathelin Bay Associates LLC in St. Louis. "Most likely, a buyer would be private equity companies, if a couple of them invested jointly."
Thomas Blaige, chairman and CEO of Blaige & Co. in Chicago, added that Schulman would be "a great deal" for plastics investors Arsenal Capital Partners or Apollo Global Management LLLC, both of New York.
Private equity firms "would have a lot of interest in a company of Schulman's size," said Deb Douglas, owner of Douglas Group of St. Louis. "That way they can put more money into one endeavor."
