A. Schulman Makes $563 Million Bid Chemical Maker Ferro
Ferro shareholders would receive $6.50 a share, half in cash and half in Schulman stock, Akron, Ohio-based Schulman said today in a statement. Ferro directors unanimously rejected the offer, the Mayfield Heights, Ohio-based company said in a separate statement today. The bid is 25 percent higher than Ferro’s closing price on March 1, valuing Ferro at $855 million including assumption of debt.
Schulman Chairman and Chief Executive Officer Joseph M. Gingo is trying to acquire Ferro while it operates with an interim CEO and battles investor efforts to nominate a slate of directors because of company “under performance.” FrontFour Capital Group LLC and Quinpario Partners LLC announced plans in January to nominate three people to Ferro’s board.
“We believe Ferro’s shares will trade above the offer price as it is likely a starting point for Schulman and likely pushes any other interested parties to enter the bidding,” Chris Shaw, a New York-based analyst at Monness Crespi Hardt & Co., said in a note today.
Ferro rose 31 percent to $6.80 at the close in New York, the most since July 15, 2009. The shares have climbed 63 percent this year.
The takeover bid is not in the best interest of shareholders, who should take no action, Ferro said in the statement.
Schulman first contacted Ferro in November and sent a letter on Feb. 13 expressing “strong intent” in pursuing the merger. The offer may be adjusted as the company reviews Ferro’s business through due diligence, Schulman said.
An offer of about $7.50 a share would probably get Ferro “interested,” John McNulty, a New York-based analyst at Credit Suisse Group AG who rates Ferro equivalent to a hold, said in a note today.
The offer is 6.8 times 2013 earnings before interest, taxes, depreciation and amortization, Shaw said. Accounting for $35 million in cost savings forecast by Schulman, the bid is 5.3 times Ebitda, he said.
Ferro operates units that make electronic materials, coatings, ceramics, plastics, plastic additives and pharmaceuticals. Schulman said all the units except pharmaceuticals align with the company’s “core competencies.”
Ferro’s businesses don’t have significant overlap with Schulman, except the specialty plastics unit, said Shaw, who rates Ferro neutral and doesn’t rate Schulman.
Ferro’s financial adviser is Goldman Sachs Group Inc. and its legal adviser is Jones Day.
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