* Deal represents 56 pct premium to Spartech's Tuesday close
* Deal to add to PolyOne earnings in the first year
* Shares in both acquired and acquirer jump
By Swetha Gopinath
Oct 24 Chemical company PolyOne Corp
struck a $246 million deal to buy plastic products maker
Spartech Corp, a maker of bulletproof barriers and
aircraft cabin windows, to enter new markets.
The deal represents a premium of 56 percent to Spartech's
Tuesday close of $5.14 on the New York Stock Exchange, yet the
shares of both companies jumped.
PolyOne stock rose as much as 9 percent to an all-time high
of $18.32 on the New York Stock Exchange while Spartech shares
lept 65 percent to a 20-month high of $8.48.
While well above the $8 offer price for stock-and-cash deal
based on Tuesday's close, the gain for Spartech reflected the
rise in PolyOne shares.
Piper Jaffray analyst Mike Ritzenthaler said PolyOne was
getting Spartech for a "relatively inexpensive price."
"(The deal) was not more than 7.5 times trailing earnings
before interest, taxes, depreciation, and amortization (EBITDA),
which is pretty low for a specialty chemicals company, he said.
Spartech stockholders will receive $2.67 in cash and 0.3167
PolyOne shares for each share held, or $8 per share based on
PolyOne's Tuesday close of $16.84. The deal value is based on
Spartech's 30.79 million shares outstanding as of Sept. 1,
according to Thomson Reuters data.
PolyOne said it expects the buyout to add to earnings in the
first year, excluding acquisition-related costs and charges. The
company said the deal will eventually add 50 cents to earnings
The deal, expected to close in the first quarter of 2013,
values Spartech at $393 million, including assumption of $142
million in debt, the companies said.
Along with its aerospace and security products, Spartech
makes consumer and medical packaging products. It makes plastic
sheet, specialty film laminates, specialty plastic alloys, color
concentrates and blended resin compounds and has annual revenues
of about $1.2 billion.
PolyOne will finance the deal with cash on hand and new
Ritzenthaler said PolyOne was likely to make at least one
more small acquisition this year.
"Historically, Polyone's organic growth has been in low
single digits. It has been important for PolyOne to make these
bolt-on acquisitions" he said.
PolyOne acquired ColorMatrix, manufacturer of colorants and
other additives for plastics last October. The deal added about
2 to 3 cents to earnings per share in 2012.
Bank of America Merrill Lynch, Moelis & Co, KeyBanc Capital
Markets and Jones Day advised PolyOne on the deal, while
Barclays and K&L Gates were Spartech's advisers.
PolyOne posted a better-than-expected profit for the third
time this year, helped by an improved product mix.
Shares in PolyOne eased back from their high to trade at
$18.09 by midday on the NYSE while Spartech traded at $8.26.