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Despite seeing interest from strategic buyers for parts of the company, A. Schulman does not see any sense in a break-up, dealReporter has learnt. The listed Ohio-based plastic resins company, which recently hired a new CEO, has not been approached by any potential suitor interested or able to pay a strategic premium for the entire company.
Moreover, the credit markets prevent a financial sponsor from buying A. Schulman, as available borrowing multiples in the industry are roughly in the 5x range. A. Schulman is currently trading at about 8.7x enterprise value/EBITDA.
A source claiming knowledge of the situation said interest had materialized for some of Schulman’s assets, specifically its plastics compounding plants in Europe, since the company retained Credit-Suisse as an advisor in response to pressure from shareholder activist Ramius Capital. This person also claimed that Eastman Chemical Company had shown interest in parts of A. Schulman, and that Wellman had indicated interest on a partnership basis.
There is no ongoing official process or auction for A. Schulman, said the source, but noted that the company had been receiving calls with ideas from interested parties. Asked whether he believed the company would initiate a sales process, the source responded that he was unsure what Credit-Suisse’s mandate was for this situation.
“This is without a doubt the worst time to sell the company,” said the source, adding that strategics are not currently seeking acquisitions in the plastics or residential construction space.
Additionally, A. Schulman’s management will not consider any proposals which discount future revenues from its Invision business’ new offerings and specialized plastics, he said. In order to command an attractive premium in the event of a sale, A. Schulman will need more time to realize results from its newer Invision products, which could take up to two years to “show real revenues” the source said. Meanwhile, the specialized plastics division, while producing at high quantities, has poor margins that can be improved to make the business more profitable, he said.
The source speculated that the company will look at “soft restructuring and re-organization” alternatives, such as cost-cutting and other alternatives.
Meanwhile, an industry banker said he did not see any opportunity to break up A. Schulman, and added that Ramius’ timing to push for a sale of the company was poor. Further, the banker said any sponsor would struggle to find financing to buy A. Schulman, and added that in his opinion, the company was trading beyond its true value.
A. Schulman, Eastman Chemical Company and Wellman spokespeople did not return calls by press time.
Additional reporting by Claudia Montoto
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