LyondellBasell to acquire Schulman to create compounding business worth US$4.6 bn

With the US$130 billion merger between Dow Chemical/DuPont (DowDuPont) just completed, the year has started off with another mega deal. Chemicals firm LyondellBasell is to acquire US compounding firm A. Schulman in a deal worth US$2.25 billion, which is set to double the size of LyondellBasell's existing compounding business.

The acquisition builds upon LyondellBasell's existing platform in this space to create a premier Advanced Polymer Solutions business with broad geographic reach, leading technologies and a diverse product portfolio.

Under the terms of the agreement, LyondellBasell will purchase 100% of A. Schulman common stock for US$42 per share in cash and one contingent value right per share and assume outstanding debt and certain other obligations. In addition, the contingent value rights generally will provide a holder with an opportunity to receive certain net proceeds, if any are recovered, from certain ongoing litigation and government investigations relating to A. Schulman's Citadel and Lucent acquisitions.

LyondellBasell is using cash-on-hand to finance the acquisition. LyondellBasell expects to achieve US$150 million in run-rate cost synergies within two years, primarily by leveraging its well-established approach to cost discipline and productivity, as well as its culture of operational, business and commercial excellence. Further, the acquisition is expected to be accretive to earnings within the first full year following close.

The combined businesses had revenues of US$4.6 billion and adjusted EBITDA of US$446 million over the last 12 months.

The proposed acquisition, which has been unanimously approved by the respective boards of LyondellBasell and A. Schulman, is subject to customary closing conditions, including regulatory approvals and approval by A. Schulman shareholders. The acquisition is expected to close in the second half of 2018.

"The acquisition of A. Schulman is a natural extension of our current platform. 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, such as packaging and consumer products, electronics and appliances, building and construction, and agriculture," said Bob Patel, CEO of LyondellBasell.

The automotive market currently account for about 90% of LyondellBasell’s plastic compounding revenue and that will drop to just over 50% after the deal closes.

"This transaction, which provides our shareholders with a compelling, immediate cash premium, represents the culmination of a robust assessment of strategic alternatives undertaken by our Board of Directors," said Joseph M. Gingo, Chairman/President/CEO of A. Schulman, Inc. "We are delighted to join forces with LyondellBasell, an industry leader we have admired for many years. LyondellBasell not only shares our commitment to meeting customers' demanding requirements, but with its scale and resources, the combined business will be better positioned to address a broader range of customer needs by integrating across applications and offering customers a wider range of solutions in attractive and growing markets. We also expect this combination to create significant opportunities for A. Schulman employees, whose professionalism and expertise will be integral to advancing LyondellBasell's vision, values and commitment to making a positive global impact."

JP Morgan and Dyal Co are LyondellBasell’s financial advisers and Citigroup is A. Schulman’s adviser. Shearman & Sterling LLP is LyondellBasell’s legal counsel, and Skadden, Arps, Slate, Meagher & Flom LLP is advising A. Schulman.

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(PRA)