- Why did A. Schulman acquire ICO, Inc.? A. Schulman’s strategic objectives include being the leading global manufacturer in both masterbatch and rotomolding, and the acquisition of ICO, Inc. advances A. Schulman’s position in these two important growth areas. ICO has a notably large global production footprint in rotomolding. Furthermore, we believe that our business will benefit from ICO’s experience in particle size reduction. In the area of masterbatch, the A. Schulman and Bayshore enterprise will specialize in highly-filled concentrates and functional additives that are positioned to offer complete solutions at any level to serve the film and packaging markets. There are also opportunities to share and leverage both organizations’ knowledge and manufacturing technology, and, finally, the combined organization has opportunities to expand A. Schulman’s distribution presence.
- Who is ICO, Inc.? Based in Houston, Texas, ICO produces custom polymer powders for rotational molding and other polymer segments, including textiles, metal coatings and masterbatch. ICO is an industry leader in size reduction, compounding and other tolling services for plastic and non-plastic materials.
- What is the strategic fit between A. Schulman and ICO? Our two businesses are extremely complementary across markets, product lines, and geographically around the world. The addition of ICO’s masterbatch and rotomolding facilities to A. Schulman’s facilities, specialty products and technical capabilities, along with our other combined skill sets, will strengthen our ability to serve customers. ICO will allow us to increase our presence in the U.S. masterbatch market, and gain plants in the high-growth markets of Brazil and Australia while adding another facility in Asia to bring our total plants in that region to four, including the facility we plan to build in India. In Europe, we will also expand our presence and add rotomolding and size reduction to our capabilities.
- How important is rotomolding to A. Schulman’s future? One of our strongest core competencies is in developing compounded resins for rotationally molded products such as gas and water tanks, kayaks, playground equipment and other large applications. We have developed the technical capability and are committed to a robust product development pipeline. Expanding our ability to serve this market, both technically and geographically into the markets of Europe, Latin America and Asia, is critical to our success, and a key component of our interest in ICO.
- What significance does ICO’s expertise in size reduction hold for A. Schulman? ICO is the global leader in size reduction technology, which is used to grind compounded resins into fine, custom plastic powders for rotational molding and other specialty markets. These unique materials can offer a variety of high-performance attributes, including good adhesion between the polymer matrix and fiber reinforcement, excellent toughness, and superior hydrocarbon and flame resistance. Demanding applications include water storage, toys, aerospace, automotive, sporting equipment, marine, and construction.
- How will ICO be integrated into A. Schulman’s business? We have created a cross-functional integration team led by experienced members of both ICO and A. Schulman’s management to coordinate all integration activities. These activities will be supported by outside experts as needed. Integration plans were developed by all business and functional leaders and are designed to begin upon close.
- What does this mean for the customers of both companies?
The two companies believe this transaction will bring significant value and opportunity to the customers of the combined business as a result of:
- Enhanced and complementary product offerings
- Expanded global reach
- A financially stronger global supplier going forward
- Shared technology and product development focused on better solutions for customers
- Is A. Schulman considering other acquisitions? The improvements A. Schulman has made to its operations and balance sheet during the past two years have strengthened its financial position to allow it now to invest in strategic acquisitions. The Company continues to seek acquisitions that would provide the highest impact for the business, generate maximum return on invested capital and create additional shareholder value, and, most importantly, support the Company’s strategic objectives while preserving our financial strength.
- How will this transaction impact the geographic mix of A. Schulman’s business?
ICO’s masterbatch and rotomolding facilities in North America, South America, Europe and the Asia-Pacific region are largely complementary to A. Schulman’s existing operations and will greatly expand A. Schulman’s ability to serve customers in those markets. For example, the ICO acquisition will enable A. Schulman to expand its footprint in Australia, Brazil, Malaysia and European countries such as France, Italy and Holland. At the same time, A. Schulman’s existing operations in Hungary, Poland, Sweden and Turkey will be able to introduce ICO’s size reduction and rotomolding capabilities into those fast-developing markets.
Approximately two-thirds of ICO’s revenues are derived from Europe, Asia and South America, while nearly three-fourths of A. Schulman’s revenues come from outside North America.
- What is the total cost of this transaction? Under the terms of the agreement, the total consideration received by ICO shareholders is approximately $235 million, with the value based on A. Schulman’s April 30, 2010, closing stock price of $26.01 per share. The formula-driven value per share of this transaction is approximately $8.37 per ICO share based on the April 30 closing value of the A. Schulman common stock. ICO, Inc. shareholders will receive a combination of $3.64 in cash and .181816 A. Schulman shares in exchange for each ICO share.
A. Schulman Employees
- Will there be job reductions or facility closings as a result of this transaction? While we expect some duplicate positions to be eliminated at the corporate level, we anticipate no major job reductions at this time given that our businesses are largely complementary.
- How is A. Schulman communicating this news to its customers and suppliers? Senior management has taken proactive steps to contact key customers and suppliers surrounding the deal and to assure them that our commitment to quality products and customer service remains unchanged. Furthermore, we are reaching out to them to explain how our combined organizations can provide them with even more value and service.
- What can you tell us about ICO? Based in Houston, Texas, and with 20 locations in nine countries, ICO produces custom polymer powders for rotational molding and other polymer related businesses, such as the textile, metal coating and masterbatch markets. ICO is an industry leader in size reduction, compounding and other tolling services for plastic and non-plastic materials. ICO’s Bayshore Industrial subsidiary produces specialty compounds, concentrates and additives primarily for the plastic film industry.
- How will their business be integrated into A. Schulman’s – meaning which business unit(s) will they be joining? A. Schulman’s reporting segments post-merger will be Europe, North America Masterbatch (“NAMB”), North America Engineered Plastics (“NAEP”), Bayshore, ICO Polymers North America (“IPNA”) and Asia/Australia.
- How should we handle inquiries from the media? As always, they should be referred to your manager or to Jennifer Beeman in corporate communications in Akron.
- Will there be job reductions or facility closings as a result of this transaction? While we expect some duplicate positions to be eliminated at the corporate level, we do not anticipate significant job reductions at this time given that our businesses are largely complementary.
- How are we communicating this news to our customers and suppliers? Senior management has taken proactive steps to contact key customers and vendors surrounding the deal and to assure them that our commitment to quality products and customer service remains unchanged. Furthermore, we are reaching out to them to explain how our combined organizations can provide them with even more value and service.
- What should I tell my customers and suppliers? We believe that the merger of A. Schulman and ICO will provide our customers with the same quality products and top-notch service our customers expect as well as the benefit of enhanced technologies, broader product capabilities and greater resources that will allow our customers to succeed in the marketplace.
- We see this combination of our businesses as providing opportunities for our customers and suppliers based on:
- Greater access to rotomolding technology throughout the combined company’s larger global footprint, covering North America, Europe, Asia, South America and Australia
- Wide variety of solutions that offer added value as a result of size reduction technology
- A total of four plants in Asia, including ICO’s plant in Malaysia and a new facility A. Schulman is planning to build in India
- Wide range of technical center activities and applications knowledge, and manufacturing technology from across the two organizations around the world
- Greater market coverage and availability of products through our distribution business
- Strong financial position with a solid balance sheet and an excellent liquidity position
- How will this acquisition affect existing business groups such as Bayshore Industrial and ICO Polymers? Bayshore and ICO Polymers’ worldwide businesses are highly valued components of our business and, in fact, are part of what attracted A. Schulman to us. Bayshore and ICO Polymers North America (“IPNA”) will become separate business units within A. Schulman.
- Once the deal is completed, will our Houston headquarters be closed? It is our intent to keep an office in Houston open for the short term. There are ICO associates who have accepted full-time offers with A. Schulman as well as others who will serve in a transitional role. Keith Haddock will oversee and coordinate activities in the Houston location. Long-term decisions have not yet been made on the Houston office.
- What can you tell us about A. Schulman?
Headquartered in Akron, Ohio, A. Schulman is a leading international supplier of high-performance plastic compounds and resins. These materials are used in a variety of consumer, industrial, automotive and packaging applications. The Company employs about 2,000 people and has 17 manufacturing facilities in North America, Europe and Asia. Revenues for the fiscal year ended August 31, 2009, were $1.3 billion.
They are very excited to have ICO join their company. We see many synergies and expanded opportunities for both sets of customers.
- Why is A. Schulman the best company to acquire ICO? The businesses of A. Schulman and ICO are extremely complementary across markets, product lines and geographies. Throughout senior management’s discussions with A. Schulman, we have met a number of wonderful, enthusiastic and energized people and we are confident that the chemistry between our two teams will be excellent.
- How should we handle inquiries from the media? All inquiries from the media should be referred to Jennifer Beeman in corporate communications in Akron.
- Is there something we could have done differently so that we didn’t get acquired? We see this as a very positive move for both companies. The businesses of A. Schulman and ICO are extremely complementary across markets, product lines and geographies. Throughout senior management’s discussions with A. Schulman, we have determined that, while there were other options, this step was in the best interests of our business to continue to grow.
- Why did you decide to finance the acquisition this way? Our strengthened financial position has given us the ability and flexibility to invest in strategic acquisitions. We believe the combination of cash and stock provides the highest impact for the business, generates maximum return on invested capital, is the best use of cash on hand, and provides us additional financial flexibility going forward.
- What are the fees associated with this transaction? We estimate pre-tax fees of approximately $10 million of total deal costs.
- How much cost savings are you anticipating, once the two organizations are integrated? A. Schulman expects to achieve approximately $15 million in annual synergies by fiscal 2012 through the consolidation and centralization of global purchasing activities, tax benefits and elimination of corporate costs for the combined organization. This does not include any additional manufacturing and sales synergies that may be generated after the two companies are fully integrated. We are beginning the process of identifying those synergies now.
- To complete the integration, is A. Schulman divesting any businesses of ICO’s or its own? Our two businesses are extremely complementary across product lines and geography. This transaction is about growth and opportunity in two markets that we have targeted – masterbatch and rotomolding. We will continue to examine the business and make strategic decisions based on our markets and demand.
- What about management of the combined entity – how will it change? The key business leaders of ICO will remain with the organization including the leaders of each of the ICO business units. John Knapp will no longer serve as CEO. Under the terms of the agreement, two current ICO directors, Gregory T. Barmore and Eugene R. Allspach, will be joining the A. Schulman Board of Directors.
- How different are the technology platforms? This is usually one of the areas that slows down integration. How are you preparing for that? All ICO facilities will remain on their current ERP system and financial systems for now and plans are under way to integrate A. Schulman and ICO financial systems to ensure information flow during the short term. Our business leaders have plans to develop a longer-term strategy to move toward a common system platform. In the case where systems may not be similar, we will provide training for those impacted associates.
- What percent of customers do the two companies share? We did not have access to each other’s customer lists prior to closing. However, we expect to have little overlap, given that our two businesses are extremely complementary across product lines and geography.
Certain statements in this release may constitute forward-looking statements within the meaning of the Federal securities laws. These statements can be identified by the fact that they do not relate strictly to historic or current facts. They use such words as "anticipate," "estimate," "expect," "project," "intend," "plan," "believe," and other words and terms of similar meaning in connection with any discussion of future operating or financial performance. These forward-looking statements are based on currently available information, but are subject to a variety of uncertainties, unknown risks and other factors concerning the Company's operations and business environment, which are difficult to predict and are beyond the control of the Company. Important factors that could cause actual results to differ materially from those suggested by these forward-looking statements, and that could adversely affect the Company's future financial performance, include, but are not limited to, the following:
- Worldwide and regional economic, business and political conditions, including continuing economic uncertainties in some or all of the Company's major product markets;
- Fluctuations in the value of currencies in major areas where the Company operates, including the U.S. dollar, Euro, U.K. pound sterling, Canadian dollar, Mexican peso, Chinese yuan and Indonesian rupiah;
- Fluctuations in the prices of sources of energy or plastic resins and other raw materials;
- Changes in customer demand and requirements;
- Escalation in the cost of providing employee health care;
- The outcome of any legal claims known or unknown;
- The performance of the global auto market;
- The global financial market turbulence; and
- The global or regional economic slowdown or recession.
Additional risk factors that could affect the Company's performance are set forth in the Company's Annual Report on Form 10-K. In addition, risks and uncertainties not presently known to the Company or that it believes to be immaterial also may adversely affect the Company. Should any known or unknown risks or uncertainties develop into actual events, or underlying assumptions prove inaccurate, these developments could have material adverse effects on the Company's business, financial condition and results of operations.