Shares of A. Schulman Inc. (NASDAQ: SHLM) rose sharply on Thursday and were up more than 11% at 10:45 a.m. EST after the plastics maker agreed to be acquired by LyondellBasell (NYSE:LYB).
LyondellBasell will pay a total of $2.25 billion to purchase A. Schulman. Under the terms of the agreement, LyondellBasell will hand over $42 per share in cash, as well as one contingent value right per share. Those rights will enable A. Schulman investors to potentially receive the net proceeds that the company might recover from the ongoing litigations and investigations relating to the acquisitions of Citadel Plastics and Lucent Polymers.
The merger will create an industry-leading supplier of plastic compounds by doubling the size of LyondellBasell's existing compounding business. That increased scale leads the company to believe it can capture $150 million in annual cost synergies within two years, while the deal should be accretive to earnings within the first year.
With shares of A. Schulman currently trading above the $42 a share cash purchase price, there doesn't seem to be much upside left for investors. While there's always the possibility of another bidder swooping in with a higher offer, or the contingent value rights paying off, there's also a risk that the deal could fall through. Because of that, investors should at least consider cashing out and reinvesting their proceeds into a top dividend-paying chemicals stock or in one of February's top stocks to buy.