Consumables

A. Schulman Offers To Acquire Ferro Corporation

Tuesday 05. March 2013 - -- $6.50 per share to be paid half in cash and half in shares of A. Schulman common stock

— Offer represents an estimated total enterprise value of $855 million
including equity value of $563 million
— Offer represents a 25 percent premium over the closing price as of March
1, 2013 of Ferro common stock and a 32 percent premium over
volume-weighted average trading price over previous 60 days
— Transaction expected to be accretive the first year following the
acquisition
A. Schulman, Inc. (Nasdaq-GS: SHLM) announced today that it has made a proposal to the Board of Directors of Ferro Corporation (NYSE: FOE) to acquire all of the outstanding shares of Ferro common stock for per-share consideration of $6.50, representing an estimated total enterprise value of approximately $855 million including total indebtedness. The offer represents a 25 percent premium over the closing price of Ferro common stock on March 1, 2013, and a 32 percent premium over the volume-weighted average trading price over the preceding 60-day period.
The Company said its proposed offer price of $6.50 per share includes an immediate cash payment of $3.25 for each Ferro share outstanding and $3.25 worth of A. Schulman common stock. When cost savings and synergies are fully implemented, A. Schulman estimates annual savings of $35 million over and above the previously announced Ferro targets. Based on these additional savings, A. Schulman believes that its offer presents the opportunity for significant future value to Ferro shareholders through the equity portion of the consideration. A. Schulman stated that its offer was based upon publicly available information about Ferro, which reported sales of approximately $1.2 billion through the first nine months of its fiscal year ended December 31, 2012. However, with greater visibility into Ferro’s businesses, A. Schulman expects its offer could be adjusted subject to customary due diligence.
A. Schulman expressed its “strong intent” in pursuing the combination in a letter to Ferro on February 13, 2013. Ferro’s Board rejected A. Schulman’s offer and expressed their belief that the company should remain independent. A. Schulman first contacted Ferro in November 2012.
“A. Schulman and Ferro are both recognized leaders in specialty chemicals with value-added product lines, similar business models, complementary competencies, markets and applications,” said Joseph M. Gingo, Chairman, President and Chief Executive Officer of A. Schulman. “We believe our combination will deliver superior value to our respective shareholders and offer better value to customers, and we would welcome the opportunity to engage in a mutually beneficial dialogue with Ferro’s Board and management.”
Gingo added, “A. Schulman has demonstrated a proven ability to execute reorganization, growth and acquisitions. Ferro’s business units align with A. Schulman’s core competencies with the exception of Pharmaceuticals, which is not strategic to us. We see substantial synergies and both geographic and market growth opportunities resulting from this compelling combination, which we would hope to be a consensual transaction.”
A. Schulman Financial Strength to Propel Accelerated Growth, Value Creation
“We have tremendous respect for Ferro and its people,” said Gingo. “However, cash flow is required not only for the restructuring efforts already publicly identified by Ferro, but also for growth, the capacity to be opportunistic in the marketplace, and the ability to create value for shareholders.”
Over the past five years, A. Schulman has generated more than $400 million in free cash flow. By comparison, Ferro has generated approximately $60 million during that same period.
Gingo added, “A. Schulman’s ability to generate strong free cash flow and its successful track record of integrating acquisitions and recognizing synergies ahead of schedule will help to accelerate and improve Ferro’s value creation timeline. We also believe that incorporating Ferro’s products and technologies into our corporate growth strategies, which focus on adjacent markets, new products and technologies, and cross-selling will provide a powerful platform to enable profitable and sustainable growth and ensure long-term, enhanced shareholder value.”
Since adopting a strategy in 2008 to move to higher-margin businesses and exit low-margin businesses, A. Schulman has successfully executed consolidations, restructurings and acquisition synergies that have been beneficial to the Company over the past five years. For example, with the 2010 acquisition of ICO, Inc., the Company achieved $15 million of synergies one year ahead of schedule.
Gingo estimated that the acquisition of Ferro would provide annual synergies of $35 million – including consolidation of corporate offices, integration of the plastics business, pricing and sourcing efficiencies, cross selling and value selling – in addition to Ferro’s previously announced projected savings of $50 million.
“In addition to the near-term synergies and potential restructuring efficiencies, the long-term benefits to A. Schulman and Ferro shareholders include substantially enhanced returns on invested capital and further growth in higher-margin business segments and global markets. We expect the proposed transaction to be accretive in the first year following the acquisition.
“Accordingly, we request the Ferro Board reconsider their expressed position to remain independent. We also encourage Ferro shareholders to communicate with their Board, and ask them to re-examine their decision regarding our offer. We believe that our offer will bring attractive and timely value creation to both Ferro and A. Schulman shareholders,” stated Gingo.