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LyondellBasell (LYB) to Acquire A. Schulman for $2.25 Billion

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Chemicals giant, LyondellBasell Industries N.V. (LYB - Free Report) has agreed to buy A. Schulman, Inc. in a deal worth $2.25 billion, 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 planned acquisition has been unanimously approved by the boards of the companies and is subject to regulatory clearances and approval by shareholders of A. Schulman and other customary closing conditions. The acquisition is expected to consummate in second-half 2018.

Shearman & Sterling LLP is serving as LyondellBasell's legal counsel on the deal while J.P. Morgan and Dyal Co. are serving as financial advisors.

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 the past six months. The company’s shares have rallied around 27.5% over this period, compared with roughly 14.1% gain recorded by the industry.


 

LyondellBasell’s profits surged more than two-fold year over year to $1.9 billion or $4.80 per share in the fourth quarter of 2017. The bottom line was boosted by a non-cash benefit from the U.S. tax reform of $2.07 per share.

Adjusted earnings of $2.73 per share for the quarter outstripped the Zacks Consensus Estimate of $2.52. Revenues went up roughly 18% year over year to $9,135 million in the quarter, beating the Zacks Consensus Estimate of $8,785 million. The company witnessed higher sales across its segments in the quarter.

LyondellBasell noted that strong global demand and delays in capacity additions across the industry have led to improved outlook for 2018. The company intends to realize the benefits of strong operating rates across its global portfolio of assets and continue the upward trajectory in profitability for the Houston refinery. The company expects strong contributions from its refinery in 2018 driven by the efforts to improve its reliability and performance.

LyondellBasell is a Zacks Rank #1 (Strong Buy) stock.

Other Stocks to Consider

Other companies worth considering in the basic materials space include Methanex Corporation (MEOH - Free Report) and The Mosaic Company (MOS - Free Report) , both sporting a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Methanex has an expected long-term earnings growth rate of 15%. Its shares have gained roughly 32% over the past six months.

Mosaic has an expected long-term earnings growth rate of 9.5%. Its shares have rallied 29% over the past six months.

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