A. SCHULMAN
Corporate raider targets US compounder and distributor / “Neglect” of shareholder interests
Pressure on leading US-based plastics compounder and distributor A. Schulman (Akron, Ohio / USA, www.aschulman.com) by New York corporate raider and would-be leveraged buyout specialist Jim Mitarotonda is intensifying. In mid-September, the Italian-born investor´s Barington Company Equity Partners announced it had acquired 8.12% of Schulman´s equity, after increasing its stake to 5.6% in June of this year. Toward month´s end, Mitarotonda enlisted the aid of hedge funds as he ratcheted his stake up to 8.81%. He is now the second largest shareholder.
The investor has been long critical of the plastics company´s management, suggesting it neglects shareholder interests and in particular has repeatedly ignored his own suggestions for improving value. Schulman indeed has been a chronic underperformer. While stock market indices have risen by more than 100% over the past ten years, the company´s stock has fallen by around 30%.
What Mitarotonda wants Schulman to do – other than to elect his candidates to the board of directors – is to engage an investment bank to find a buyer for the company and thus raise its stock price. While Schulman has enaged an investment bank, this is mainly for defence against an unfriendly takeover attempt.
In the past Mitarotonda has forced companies, up to now outside the plastics sector, to liquidate. According to a Barington filing with the US Securities and Exchange Commission (SEC), the investor has enlisted Philip Ashkettle, CEO of M.A. Hanna in 1999-2000 before its merger with Geon into Polyone, to be part of a proposed slate of new directors.
In response to accusations by Barington in June that Schulman management had refused to meet with Mitaro-tonda to explore “potential strategies for maximising shareholder value,” CEO Terry Haines said his company is “always open to meeting with investors to discuss our business and strategies.” However, he said management is confident that its growth current strategy is adequate.
Sales of A. Schulman, one of the largest companies in its field worldwide, improved by 12% in fiscal 2004 (31 August) to USD 1.24 bn. In the first three quarters of fiscal 2005, its sales, at USD 1.01 bn, were 13% above the comparable period of 2004, although operating income was down 40%, due to higher raw materials costs, and net earnings were down 8%.
The grab for Schulman is the first attempt by Mitarotonda, who US press reports say is regarded as an especially aggressive strategic opponent of established managers, to play in the “billion dollar corporate league.”After Barington´s acknowledgement in June that it had upped its shareholding, shares of the plastics company rose more than 17%. The investor is known in corporate circles for pushing firms to exit “dead end” businesses and cut excessive spending, as well as for picking battles he can win.
The investor has been long critical of the plastics company´s management, suggesting it neglects shareholder interests and in particular has repeatedly ignored his own suggestions for improving value. Schulman indeed has been a chronic underperformer. While stock market indices have risen by more than 100% over the past ten years, the company´s stock has fallen by around 30%.
What Mitarotonda wants Schulman to do – other than to elect his candidates to the board of directors – is to engage an investment bank to find a buyer for the company and thus raise its stock price. While Schulman has enaged an investment bank, this is mainly for defence against an unfriendly takeover attempt.
In the past Mitarotonda has forced companies, up to now outside the plastics sector, to liquidate. According to a Barington filing with the US Securities and Exchange Commission (SEC), the investor has enlisted Philip Ashkettle, CEO of M.A. Hanna in 1999-2000 before its merger with Geon into Polyone, to be part of a proposed slate of new directors.
In response to accusations by Barington in June that Schulman management had refused to meet with Mitaro-tonda to explore “potential strategies for maximising shareholder value,” CEO Terry Haines said his company is “always open to meeting with investors to discuss our business and strategies.” However, he said management is confident that its growth current strategy is adequate.
Sales of A. Schulman, one of the largest companies in its field worldwide, improved by 12% in fiscal 2004 (31 August) to USD 1.24 bn. In the first three quarters of fiscal 2005, its sales, at USD 1.01 bn, were 13% above the comparable period of 2004, although operating income was down 40%, due to higher raw materials costs, and net earnings were down 8%.
The grab for Schulman is the first attempt by Mitarotonda, who US press reports say is regarded as an especially aggressive strategic opponent of established managers, to play in the “billion dollar corporate league.”After Barington´s acknowledgement in June that it had upped its shareholding, shares of the plastics company rose more than 17%. The investor is known in corporate circles for pushing firms to exit “dead end” businesses and cut excessive spending, as well as for picking battles he can win.
06.10.2005 Plasteurope.com [203695]
Published on 06.10.2005
German version of this article...