Chemical giant LyondellBasell Industries has agreed to purchase the plastics compounding specialist A. Schulman for $2.25 billion.
Schulman is a major U.S. player in compounding, in which virgin polymer is melted down and blended with additives suitable for particular applications. The firm had earnings before taxes of about $200 million on sales of $2.5 billion over the 12-month period ending in November.
LyondellBasell has annual sales of $34.5 billion and is among the world’s largest makers of polyethylene and polypropylene. The company also has a large compounding business with $2.1 billion in revenues.
However, LyondellBasell’s business has a narrow focus. Some 90% of its sales come from polypropylene compounded for the auto industry.
The Schulman purchase, LyondellBasell says, will broaden its business into polyethylene and engineering polymer compounds for packaging, electronics, appliances, construction, and agriculture. “The acquisition of A. Schulman is a natural extension of our current platform,” says LyondellBasell CEO Bob Patel.
Charles Neivert, a stock analyst with Cowen, calls the acquisition a strategic fit and a smart move in light of all the new polyethylene plants now coming online in the U.S. and the ensuing competition for customers. “This provides a strong outlet for LyondellBasell polyethylene during a period of polyethylene expansion and will help LyondellBasell maintain operating rates during a period of industry weakness,” he wrote to clients.
The companies expect to capture $150 million in annual cost synergies within the next two years.