(Corrects deal value to $2.25 bln from $2.24 bln in Feb. 15 story)
* LyondellBasell to cut reliance on automotive sector
* Deal boosts exposure to packaging, electronics markets
* Schulman shares trade above offer of $42/shr
* Deal valued at $2.25 bln, including Schulman’s debt
By Ahmed Farhatha
Feb 15 (Reuters) - Chemicals maker LyondellBasell Industries NV said it will buy smaller rival A. Schulman Inc for $2.25 billion, doubling the size of its business that supplies plastic compounds to the packaging, electronics and building markets.
LyondellBasell’s plastic compounding business - blending molten plastic with additives - now largely caters to the automobile parts market.
“What we like about this transaction is that it diversifies our compounding business and gives us access to the full range of markets rather than just automotive where we had a very strong position,” LyondellBasell’s Chief Executive Bhavesh Patel said on a call with analysts.
Auto-end markets currently account for about 90 percent of LyondellBasell’s plastic compounding revenue and that will drop to just over 50 percent after the deal closes.
The deal, worth $2.25 billion including debt, is expected to close in the second half of 2018, the companies said.
Shares of A. Schulman were up 10.3 percent at $42.65 in afternoon trading, above the offer price of $42. LyondellBasell’s shares dipped 1.7 percent at $110.42
The deal will also marginally boost LyondellBasell’s exposure to the agricultural sector, which has been the focus of mega-deals among chemicals makers.
Dow Chemical and DuPont completed their $130 billion merger last year to form DowDuPont, while ChemChina bought Swiss seeds group Syngenta for $43 billion.
A combined LyondellBasell-A. Schulman had $4.6 billion in revenue and EBITDA margins of 9.5 percent over the last 12 months, the companies said.
The combined company is expected to hit $150 million in run-rate cost savings in two years.
After closing, the deal will add to earnings within the first full year, the companies said.
A. Schulman shareholders will also get one contingent value right per share that will give them net proceeds, if any, from the ongoing litigation and government probes related to Schulman’s Citadel and Lucent acquisitions.
J.P. Morgan and Dyal Co are LyondellBasell’s financial advisers and Citigroup is A. Schulman’s adviser. Shearman & Sterling LLP is LyondellBasell’s legal counsel, and Skadden, Arps, Slate, Meagher & Flom LLP is advising A. Schulman. (Reporting by Ahmed Farhatha in Bengaluru; Editing by Savio D’Souza and Sriraj Kalluvila)