Schulman urges Ferro to consider purchase offer

In the continuing saga, US compounder A. Schulman is urging compatriot compounder Ferro to consider its acquisition offer of US$6.50 per stock, representing a 25% premium, made early March. It expressed its willingness to adjust its initial offer as warranted by a customary due diligence process but the offer was flatly rejected by Ferro.

"Contrary to what the Ferro Board of Directors stated in a letter to Ferro shareholders dated April 18, 2013, our proposal is not a 'low-ball' offer, and we have publicly stated that we are open to revising the terms and structure of our initial offer, provided we are given an opportunity to conduct customary due diligence and engage in a meaningful dialogue with Ferro," said Joseph M. Gingo, Chairman, President/CEO of A. Schulman. "We have been and continue to be disappointed by the Ferro Board's refusal to talk, evidently driven by their stated desire to 'stay independent.'

Furthermore, the firm says that far from trying to "lure Ferro into low-ball negotiations," it's proposal represents premiums of 21%, 32%, 44% and 64%, respectively, to Ferro's 30-, 60-, 90- and 180-day volume weighted average prices prior to March 4, 2013, when the offer was publicly disclosed. It also represents a 173% premium to the 52-week low for Ferro, which was as recent as November 16, 2012. Representatives of A. Schulman have spoken directly to Ferro shareholders representing approximately 50% of total Ferro ownership, and a large majority of them indicate that the Ferro Board should not have summarily rejected the offer by stating "the board does not wish to explore your proposal further" and should have engaged in negotiations, as A. Schulman has requested.

This support is also reflected by the performance of Ferro's stock, which rapidly climbed from US$5.20 to US$6.80 per share on the day of the announcement of the offer, representing a 31% gain in shareholder value on that day alone. A. Schulman believes a significant reason for the gain in Ferro's stock price is the investment community's positive reaction to a potential transaction, rather than an overnight endorsement of Ferro's current cost cutting measures.

A. Schulman also continues to believe that it can significantly exceed the latest stand-alone cost cutting measures targeted by Ferro in its April 8, 2013 press release. As announced previously, A. Schulman expects the transaction to generate annual synergies of US$35 million, without execution risk, in addition to Ferro's projected cost cutting measures. A. Schulman believes that with its broader product, manufacturing and financial footprint and history of successful acquisition integration, its restructuring targets have a much higher likelihood of success.

Gingo also said, “We are hopeful that the Ferro Board will engage us following Ferro's annual meeting and election of directors on May 15, if not sooner. We strongly believe, and are committed to demonstrating, that the combination of A. Schulman and Ferro is the best value creation strategy for shareholders of both companies."


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