Chemical company, PolyOnePOL has landed a definitive deal to divest its Designed Structures and Solutions ("DSS") business to private equity firm, Arsenal Capital Partners for $115 million. The DSS business includes sheet, rollstock and packaging assets.
The DSS unit was created in Mar 2013 as a result of the company's acquisition of plastic products maker, Spartech Corporation. Sales from the unit fell roughly 11% year over year to $401.7 million in 2016. The business also recorded an operating loss of $3.8 million last year.
PolyOne said that the decision to sell the business came after assessing several strategic options. The sale, which is subject to satisfaction of regulatory requirements and other customary closing conditions, is expected to complete in third-quarter 2017.
PolyOne also noted that it will classify the DSS business as "held for sale" and report it as discontinued operations. It will also be required to record the DSS business assets at fair value less an amount of estimated sale costs. PolyOne expects this to result in an after-tax charge of $220 million in the second quarter of 2017. The company will provide more details of the transaction in its second-quarter earnings call.
PolyOne plans to utilize the proceeds from the sale of the DSS business to pay down short-term borrowings and finance its growth initiatives. The company said that it will look for new investment opportunities that expand its material science, polymer formulation and world-class service capabilities.
PolyOne, last month, purchased specialty inks maker, Rutland Holding Company. Rutland is a leading manufacturer of screen printing inks for the apparel market. The acquisition expands PolyOne's portfolio of specialty color, additives and inks solutions. PolyOne sees the Rutland acquisition to be immediately accretive to its earnings.
PolyOne has underperformed the Zacks categorized Chemicals-Plastics industry over a year. The company's shares have gained around 10% over this period, compared with roughly 22.8% gain recorded by the industry.
PolyOne currently carries a Zacks Rank #4 (Sell).
Stocks to Consider
Better-placed companies in the chemical space include Kronos Worldwide, Inc. KRO , BASF SE BASFY and Innospec Inc. IOSP , all sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here.
Kronos has an expected earnings growth of 354.8% for the current year.
BASF has an expected long-term earnings growth of 8.9%.
Innospec has an expected earnings growth of 7.9% for the current year.
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