Updated Feb. 16: Joseph Gingo grew up knowing all about A. Schulman Inc.
His father worked at the company's first plant. He remembers meeting founder Alex Schulman at company picnics when he was a child.
And, of course, he led the company through its major growth years, serving as CEO from 2008-14.
But the company he now oversees, which is about to be acquired by LyondellBasell Industries (LBI) in a massive $2.25 billion deal, is far different from the one he once led, suffering from a troubled purchase of Citadel Plastics in 2015.
"When I first got here, we had very little debt, so I was able to reopen a plant, buy companies and equipment and expand all over the world," Gingo said in a Feb. 15 phone interview following the announcement of the pending LBI purchase.
"When I came back, we were $1 billion in debt and Citadel wasn't generating the profits that we had expected," he said.
The $800 million Citadel acquisition, which first began when Gingo was CEO but was completed under his replacement, Bernard Rzepka, went bad after problems arose with some materials made by Citadel units.
Those problems led to Schulman taking a $402 million charge in 2016 and ousting Rzepka. Gingo resumed the CEO post in 2016, ending his retirement plans.
At that point, Gingo said Schulman started "a robust strategic alternatives process" with its board, including the possibility of keeping the company going. When Schulman received the LBI offer, he said it was "a good offer that we needed to let our shareholders know about."
Schulman's current options also are limited because of its debt, according to Gingo.
"I could invest in the company, but acquisitions are off the table, and I couldn't close plants because of severance costs," he said.
The LBI deal will mean a major shakeup in the global materials sector.
LBI — based in Houston and London — is one of the world's largest producers of olefins and polyolefins, including polypropylene and polyethylene. 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.
The transaction would create an industry-leading compounding business with combined sales of $4.6 billion and adjusted EBITDA of $446 million over the last 12 months. The new business expects to capture $150 million in cost synergies within two years, creating significant value for shareholders.
The deal adds Schulman's $2.5 billion in annual sales, 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 that gets 90 percent of its sales 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 its sales from automotive, but also with sizable chunks from packaging, electrical/electronics, building/construction and other markets.
The deal still needs the approval of Schulman shareholders and regulators, but it is expected to close in the second half of 2018.
On a conference call, LBI CEO Bob Patel said the Schulman deal reminded him in some ways of when Lyondell Chemical Co. and Basell Polyolefins combined 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."