In a major global plastics materials deal, LyondellBasell Industries is acquiring A. Schulman Inc. for $2.25 billion.
LBI — based in Houston and London — is one of the world's largest producers of olefins and polyolefins, including polypropylene and polyethylene resins. Fairlawn, Ohio-based Schulman is a leading compounder and concentrates maker in North America and Europe and also ranks as one of Europe's largest resin distributors.
In a Feb. 15 news release, LBI officials said that the deal "builds upon LyondellBasell's existing platform in the compounding/composites/powders space to create a premier advanced polymer solutions business with broad geographic reach, leading technologies and a diverse product portfolio."
The transaction creates an industry-leading compounding business with combined sales of $4.6 billion and adjusted EBITDA of $446 million over the last 12 months, they added. The new business expects to capture $150 million in run-rate cost synergies within two years, creating significant value for shareholders.
The deal adds Schulman's $2.5 billion in annual revenue, 54 manufacturing sites and 2.4 billion pounds of production capacity to LBI's own PP compounding unit, which has $2.1 billion in annual sales, 18 manufacturing sites and 2.5 billion pounds of production capacity.
One of the main benefits to LBI from the deal — as seen in materials presented before a conference call with analysts — will be diversifying a PP compounding business which gets 90 percent of its revenue from the automotive market. By comparison, Schulman's top five market segments are more varied, led by packaging with a 25 percent stake.
Combining Schulman with LBI's compounding would create a unit with 53 percent of sales from automotive, but also with sizable revenue from packaging, electrical/electronics, building/construction and other markets.
"The acquisition of A. Schulman is a natural extension of our current platform," LBI CEO Bob Patel said in the release. "This combination will allow us to provide our customers with a wider range of innovative solutions while adding the ability to serve high-growth end markets beyond the automotive sector."
"This transaction ... represents the culmination of a robust assessment of strategic alternatives undertaken by our board of directors," Schulman Chairman, President and CEO Joseph Gingo added in the release.
The deal still needs the approval of Schulman shareholders and regulators, but is expected to close in the second half of 2018.
On the conference call, Patel added that the Schulman deal reminded him in some ways of when Lyondell Chemical and Basell combined in 2011 to form LBI.
"When we complete the integration of the two companies, I think you'll see greater strength on both sides," he said.
Patel added on the call that he was "personally very excited about this transaction."
"I have a lot of respect for Schulman," he said. "This is a unique opportunity to acquire a company with a great long-term reputation."