Thursday, December 3, 2009

Plastics merger (SHLM, ICOC)

Last night, A. Schulman (SHLM) announced a merger with the smaller plastics producer ICO Inc (ICOC), valuing ICO at about $191million.

ICO is up 45% on the news today.

Details of the exchange, per the release:

Under the terms of the agreement, the total consideration is comprised of $105.0 million in cash and 5.1 million shares of A. Schulman common stock. ICO, Inc. shareholders will receive approximately $6.79 per share of ICO, Inc. stock, comprised of

(a) $3.67 in cash and

(b) $3.12 in A. Schulman stock (0.184 shares of A. Schulman stock valued at the closing price on December 2, 2009)

Due to today's drop in SHLM shares and the stock-based portion of the offer, the offer price as I write this is about 6.74 per share, leaving a premium of  1.8%. 

I'm on the call right now listening to ICO management say, among other things....

"we have confidence in our position"
"we think things are about to stabilize"
"we'll be the first of the public companies in our space to see a return to volume growth"
"we see ample room for margin improvement"

.....SOOO, instead of follow through on these challenges, you sell at $6.74, a bit over a third of the $15 the stock commanded less than 2years ago:

Wonder if this will be added to the "fake-ARB" index???

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