Chemicals giant LyondellBasell Industries N.V. (LYB - Free Report) has secured the U.S. antitrust clearance for its proposed buyout of A. Schulman, Inc. (SHLM - Free Report) in a deal worth $2.25 billion.
The termination of the required waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 satisfied one of the closing conditions to the transaction. The deal now remains subject to other customary closing conditions including approval by A. Schulman shareholders and other required regulatory approvals. The acquisition is expected to consummate in second-half 2018.
LyondellBasell last month 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 26% over this period, compared with roughly 12.8% gain recorded by the industry.
LyondellBasell, in its fourth-quarter call, 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 its 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 Kronos Worldwide, Inc. (KRO - Free Report) and Eastman Chemical Company (EMN - Free Report) .
Kronos sports a Zacks Rank #1 and has an expected long-term earnings growth rate of 5%. Its shares have rallied roughly 52% over a year. You can see the complete list of today’s Zacks #1 Rank stocks here.
Eastman Chemical has an expected long-term earnings growth rate of 8.9% and carries a Zacks Rank #2 (Buy). Its shares have gained around 38% over a year.
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