Please ensure Javascript is enabled for purposes of website accessibility

Why A. Schulman's Stock Is Rising Today

By Matthew DiLallo - Feb 15, 2018 at 11:49AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The global plastics supplier agreed to be acquired by petrochemical giant LyondellBasell.

What happened

Shares of A. Schulman Inc. (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 (LYB 0.23%).

So what

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.

A closeup of a handshake superimposed over an industrial plant.

Image source: Getty Images.

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.

Now what

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

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

A. Schulman, Inc. Stock Quote
A. Schulman, Inc.
LyondellBasell Industries N.V. Stock Quote
LyondellBasell Industries N.V.
$87.66 (0.23%) $0.20

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 07/04/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.