Global materials giant LyondellBasell has completed its $2.25 billion acquisition of A. Schulman Inc., creating what officials said is the world's largest compounding business.
"This acquisition builds upon our complementary strengths, creating a substantial value proposition for our customers and positioning the company for future growth in this space," LyondellBasell CEO Bob Patel said in an Aug. 21 news release.
Officials with LyondellBasell, based in Houston and London, added that the acquisition more than doubles the firm's existing compounding business and broadens its reach into growing, high-margin end markets such as automotive, construction materials, electronic goods and packaging.
Fairlawn, Ohio-based Schulman now will be combined with LyondellBasell's compounding business and operate as Advanced Polymer Solutions, a reporting segment within LyondellBasell. APS also will include Catalloy specialty resins and polybutene-1 materials.
Products added to the segment from Schulman include engineered composites, powders and masterbatch concentrates.
APS will be led by LyondellBasell executive Jim Guilfoyle, who will serve as its executive vice president, as well as EVP of global supply chain for LyondellBasell.
"With the combination of LyondellBasell's vertically integrated polypropylene compounding business and A. Schulman's agile customer focus across broad and growing markets, (APS) is well positioned to deliver significant value for our customers and our shareholders," he said in the release.
Schulman shareholders approved the deal in June. President and CEO Joseph Gingo said at the time that the offer "serves the best interests of all our stakeholders including our customers, suppliers, employees and the communities in which we operate."
LyondellBasell made its bid for Schulman in February. LyondellBasell is one of the world's largest producers of olefins and polyolefins, including polypropylene and polyethylene. 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 creates an industry-leading compounding business with combined sales of $4.6 billion. 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 LyondellBasell'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 LyondellBasell from the deal, officials have said, 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 will 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.
But the completion of the deal also ends Schulman's existence after 90 years as an independent company. The firm was founded in 1928 as a tire recapper in Akron, Ohio, and later moved into plastics.
Schulman was damaged by its $800 million acquisition of Citadel Plastics, after concerns arose about the contents of some materials made by Citadel. Those concerns and issues with Citadel's thermoset plastics business led Schulman to take a $402 million charge in 2016.
In an interview with Plastics News shortly after the LyondellBasell offer, Gingo said that the fraud alleged by Schulman against Citadel's former owners "was a significant factor in [Schulman's] problems paying down our debt."
If the Citadel deal had performed as expected, Schulman "would be continuing to grow as we did before and would be adding onto the business," he added.
A trial in which Schulman is seeking damages from Citadel's previous owners began in April. No decision has been reached in that case, which is being heard in Delaware Chancery Court in Wilmington, Del.
Schulman employed more than 5,000 worldwide and posted sales of around $2.5 billion for its 2017 fiscal year, which ended Aug. 31.
LBI employs more than 13,000 worldwide and posted sales of almost $34.5 billion in 2017.
