* Proposes $6.50/shr, a 25 pct premium
* Offer price could be adjusted after due diligence
* Ferro shares jump 33 percent to $6.90
* Offer valued at $855 million including debt
March 4 Chemical maker A. Schulman Inc
offered to buy Ferro Corp for $563 million to increase
its pricing power amid weak demand, but the smaller rival
rejected the bid saying it was better off continuing its own
Ferro shares jumped 33 percent to $6.90, topping A.
Schulman's offer of $6.50 per share, as the bidder said it could
adjust its offer if it gets the chance to inspect Ferro's books.
The Ferro stock was the biggest percentage gainer in
afternoon trading on the New York Stock Exchange on Monday.
"(Ferro) is obviously hoping that this is the first offer
and that either Schulman will either sweeten it, or somebody
will come and beat them," said Longbow Research analyst Dmitry
A. Schulman expressed its intent to buy Ferro in a letter on
Feb. 13, but was rebuffed by the Mayfield Heights, Ohio-based
company. A. Schulman first contacted Ferro in November 2012.
Ferro advised shareholders on Monday not to take any action
and said Goldman Sachs & Co was advising the company, with Jones
Day serving acting as its legal adviser.
A. Schulman and Ferro sell products used in industries such
as electronics and construction, and A. Schulman expects an
acquisition to help cut costs and widen its customer pool.
"Ferro's business units align with A. Schulman's core
competencies with the exception of pharmaceuticals, which is not
strategic to us," said A. Schulman Chief Executive Joseph Gingo.
The expected acquisition would add to earnings in the first
year following the transaction, Gingo said.
He estimated the acquisition of Ferro would lead to annual
synergies of $35 million, on top of Ferro's projected savings of
more than $50 million for 2014.
Akron, Ohio-based A. Schulman's offer of $3.25 in cash and
the rest in shares is at a premium of 25 percent to Ferro's
Friday close of $5.20.
The offer is valued at about of $855 million including debt,
said A. Schulman, which was founded in 1928 by Alex
A. Schulman shares were down 0.5 percent at $30.95 on the
"I don't think Ferro is a very good fit for Schulman,"
Silversteyn said. "I can't imagine another company that would be
interested in all of the businesses that Ferro has."
Ferro said in early February it sold assets related to its
shrinking business that made conductive pastes used in making
solar cells to a German company for an undisclosed sum. It also
said it would cut about 120 jobs in Europe.