Chemicals giant, LyondellBasell Industries N.V. LYB has secured the antitrust approval from the European Commission for its proposed buyout of A. Schulman, Inc. SHLM in a deal worth $2.25 billion.
The clearance satisfies one of the closing conditions to the transaction. The deal now remains subject to other customary closing conditions including other required regulatory approvals. A. Schulman’s shareholders voted in favor of the deal on Jun 14.
The acquisition, which has also been cleared by antitrust regulators in the United States, Brazil, China, Serbia, Turkey and Mexico, is expected to consummate in second-half 2018.
LyondellBasell, in February, agreed to buy A. Schulman, a move that will create a premier global provider of advanced polymer solutions with extensive geographic reach, leading technologies and a diverse product portfolio. A. Schulman is a leading supplier of high-performance plastic compounds, composites and powders.
Under the deal terms, LyondellBasell will purchase 100% of the common stock of A. Schulman for $42 per share in cash and one contingent value right per share and will also assume outstanding debt and specific other obligations. The company will use cash on hand to fund the buyout.
The buyout doubles the size of LyondellBasell's existing compounding business. It also creates a platform for future growth with reach into additional high-growth markets such as packaging and consumer products, electronics and appliances, building and construction, and agriculture. The acquisition will enable the company to offer a comprehensive range of innovative solutions to its customers.
LyondellBasell expects to capture $150 million in run-rate cost synergies within two years. The buyout is also expected to be accretive to earnings within the first full year following its closure.
LyondellBasell has outperformed the industry it belongs to over a year. The company’s shares have rallied around 30.1% over this period, compared with the industry’s growth of 6.5%.
LyondellBasell, during its first-quarter call, said that it sees seasonal margin improvements in oxyfuels and refining. It also expects to benefit from continued high operating rates in the second quarter. The imbalance between ethylene production and consumption is also expected to improve as the downstream derivative units attain full operating rates. The company also noted that strong global demand and higher oil prices continue to support strong polyolefin pricing.
LyondellBasell is a Zacks Rank #3 (Hold) stock.
LyondellBasell Industries N.V. Price and Consensus
LyondellBasell Industries N.V. Price and Consensus | LyondellBasell Industries N.V. Quote
Stocks to Consider
Better-ranked stocks worth considering in the basic materials space include Westlake Chemical Corporation WLK and The Chemours Company CC, both carrying a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Westlake Chemical has an expected long-term earnings growth rate of 12.2%. Its shares have rallied roughly 63% over a year.
Chemours has an expected long-term earnings growth rate of 15.5%. The company’s shares have rallied around 21% in a year.
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