Acquisition of Citadel Plastics puts A. Schulman in premier league, says CEO

A. Schulman Inc. (Fair Lawn, OH), an international supplier of high-performance plastic compounds, powders and resins, announced on March 23 that it has executed a definitive agreement to acquire all of the issued and outstanding capital stock of privately held Citadel Plastics Holdings Inc. (Chicago, IL), a portfolio company of private equity firms HGGC and Charlesbank Capital Partners, for $800 million.

Citadel is a leading North American specialty engineered plastics company that produces thermoset composites and thermoplastic compounds for specialty product applications spanning multiple industries including transportation, industrial and construction, consumer, electrical, energy, healthcare and safety. In 2014, Citadel had approximately $525 million of pro-forma revenue (giving effect to their recent acquisition) and pro-forma earnings before interest, taxes, depreciation and amortization (EBITDA) of approximately $75 million.

"Today's announcement marks a significant strategic milestone as we continue to transform the company beyond plastic compounding into a premier specialty plastics organization," said Bernard Rzepka, President and CEO of A. Schulman. "In early 2014, we communicated our expanded vision, which defined target areas to drive growth for A. Schulman beyond our traditional space. Citadel provides us a unique opportunity to enhance our future growth plans."

The deal, which is subject to standard closing conditions, is expected to close in the third quarter of the company's fiscal 2015. Due to the timing of the deal in relationship with A. Schulman's fiscal year end of August 31, it is not expected to be accretive in the company's fiscal 2015, but is expected to be accretive in the first 12 months of ownership, said the company, which anticipates achieving approximately $25 million in synergies within 18 months of closing, driven primarily by sourcing activities and plant efficiency actions.

"Citadel enhances our thermoplastics platform and will create a more attractive and sustainable business by regionally extending our thermoplastic portfolio in areas such as flame retardants and thermoplastic blends," stated Rzepka. "Likewise, Citadel will expand our customer-centric service and product development capabilities. With significant revenue in the U.S., Citadel enhances our regional scale and efficiencies, as well as balances our current geographic footprint."

Established in 2007, Citadel has quickly become an industry leader in multiple attractive, niche applications, including high performance auto structural, electrical power distribution, down-hole oil and gas components, and medical patient transport systems, said A. Schulman in its release. Citadel has 1,200 employees and operates 21 manufacturing facilities throughout the world, including 10 thermoplastic facilities in the United States and Canada, and 11 thermoset composite plants--seven in North America, one in Germany, one in Brazil--and a joint venture consisting of two plants in China.

"Citadel provides a solid foundation in the composite business with a diverse set of capabilities to jump-start our expanded vision initiative by adding a second growth platform to our organization with its industry-leading, added-value specialty thermoset composites business," Rzepka added. "Citadel has enjoyed long-time relationships with an impressive and diverse list of blue-chip OEM customers. Key to its success over the years has been its extensive product capabilities, which have resulted in more than 7,000 unique formulations and 2,000 active products, totaling over $500 million in potential annual revenue with a win rate that is best in the industry."

Since 2010, A. Schulman has been executing a deliberate acquisitive growth strategy in key geographic regions and expanding the company's product portfolio. During this time, the it has successfully completed 10 acquisitions and three joint ventures, which contributed 30% of sales and approximately 40% of adjusted operating income to fiscal 2014.

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