A trial involving materials firms A. Schulman Inc. and Citadel Plastic Holdings LLC has caught the attention of a New York tabloid, mainly through the involvement of former NFL star Steve Young.
The trial began April 16 in Delaware Chancery Court in Wilmington, Del. Fairlawn, Ohio-based Schulman is seeking damages related to its $800 million acquisition of Citadel in early 2015. Issues related to the Citadel acquisition — including questions about material quality at its Lucent Polymers unit — led to financial problems at Schulman.
Schulman itself now is in the process of being acquired by LyondellBasell Industries in a $2.25 billion deal.
Schulman filed the suit in June 2016. The firm is seeking unspecified damages from former Citadel owners including Huntsman Gay Capital Partners, now called HGGC, and Charlesbank, as well as from several former Citadel executives.
Young is a managing director at investment firm HGGC. He's also a member of the Pro Football Hall of Fame after a 15-year career as quarterback that included leading the San Francisco 49ers to a Super Bowl win in 1995. Young's last NFL season was 1999.
Although Young didn't appear to be directly involved in the Citadel deal, his role at HGGC was featured in a July 16 story about the trial in the New York Post. A similar story appeared July 19 in The Wall Street Journal. Both stories were written by Josh Kosman, who began his Post story with the words “NFL great Steve Young is feeling the heat — and this time, it's not from a 300-pound defensive lineman.”
Young also drew attention recently by discussing HGGC's strategy in a TV feature on CNBC. In the Post story, Kosman wrote that the trial “could prove to be embarrassing” for Young and HGGC. Kosman also quoted a court filing that said that HGGC "would have missed the blatant fraud because, as investors, their role was limited to providing financial oversight and help with M&A."
He added that, according to court filings, Schulman claims HGGC at least knew about the potential for fraud at Lucent because the PE firm's Citadel team flagged potential problems with the highly profitable Lucent product lines.
In its original filings in the case, Schulman officials said that the firm "never would have purchased, much less paid $800 million for Citadel had it know that [Lucent] was engaging in fraudulent business practices that … substantially reduced [Citadel's] profitability and growth prospects."
According to recent coverage, Judge J. Travis Laster is expected to rule on the case as soon as the end of this month. Potential damages would be decided on later in the year.
Schulman posted sales of almost $2.5 billion for fiscal 2017. The firm ranks as a leading compounder and concentrates maker in both North America and Europe and as one of Europe's leading resin distributors.
