Wednesday, ICO, Inc. (ICOC), a producer of custom polymer powders and plastic film concentrates, said it has signed a merger agreement with plastic compounds and resins supplier A. Schulman Inc. (SHLM), valued at approximately $191.4 million, comprising $105.0 million in cash and 5.1 million shares of A. Schulman common stock. In addition, the company also reported a decline in fourth quarter earnings, hurt by a 25% fall in revenue, largely due to the global economic slow down.
ICO said under the terms of the merger deal, ICO shareholders will receive about $6.79 per share of ICO, Inc. stock, comprised of about $3.67 per share in cash and approximately $3.12 in A. Schulman stock (0.184 share of A. Schulman stock valued at the closing price on December 2 ) assuming the cash-out of all ICO, Inc. stock options at their "in the money" spread based on the December 2, 2009 closing price.
The two companies believe this transaction will bring significant value and opportunity to the customers of the combined business as a result of enhanced and complementary product offerings expanded global reach, increased financial strength and Shared technology and product development focused on better solutions for customers.
Pending shareholder and regulatory approvals and other customary closing conditions, the transaction is expected to close in the spring of 2010. This transaction is not subject to a financing contingency and does not require approval by A. Schulman, Inc. shareholders.
After the merger closes, ICO, Inc. shareholders will own approximately 16% of the combined company.
If the transaction is closed, current ICO, Inc. directors Gregory Barmore and Eugene Allspach will join the A. Schulman, Inc. board of directors.
In connection with the merger agreement, ICO said it has canceled its share repurchase plan.
Akron, Ohio headquartered A. Schulman employs about two thousand people and has 16 manufacturing facilities in North America, Europe and Asia. Revenues for the fiscal year ended August 31, 2009 were $1.3 billion.
J.P. Morgan Securities Inc. acted as ICO's exclusive financial advisor in the transaction. Baker Botts L.L.P. and Locke Lord Bissell and Liddell LLP acted as legal advisors.
ICO said net income for the fourth quarter declined 27% to $1.6 million from $2.2 million in the corresponding period last year. Earnings per share declined to $0.06 from $0.08 per share in the same period last year. On average, three analysts polled by Thomson Reuters expected the company to report earnings of $0.06 per share for the quarter. Analysts' estimates typically exclude special items.
The company attributed the decline in earnings to decrease in volumes, partially offset by an increase in gross margin from 15.1% to 18.4% and lower interest expense due to lower borrowings.
Revenues were $80.5 million, down 25% from $107.99 million in the same quarter of the previous year. Two analysts expected the company to report revenues of $76.78 million for the quarter.
The company ascribed the decline in revenue to lower volume due to reduced customer demand as a result of the global economic slowdown and lower average selling prices, as a result of lower resin prices. The translation effect of a stronger U.S. Dollar reduced revenues by $9.7 million.
ICO rose $0.30 or 7.14% and closed Wednesday's regular trading session at $4.50.
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