Filed Pursuant to Rule 424(b)(3)

Registration No. 333-164085

 

 

Proxy Statement/Prospectus

 

We are pleased to report that the board of directors of ICO, Inc., which is referred to as ICO, has approved a merger involving ICO and A. Schulman, Inc., which is referred to as A. Schulman, under which A. Schulman will acquire ICO in a part cash, part stock transaction. Pursuant to the terms of the Agreement and Plan of Merger, which is referred to as the merger agreement, the contemplated transaction is structured as a merger in which ICO will become a wholly-owned subsidiary of A. Schulman. The boards of directors of ICO and A. Schulman have each approved the merger and believe it will result in a combined company with world-class products, technologies and capabilities.

 

We cannot complete the merger unless ICO shareholders approve the merger agreement, and a special meeting of ICO’s shareholders, which is referred to as the special meeting, has been called for that purpose. The special meeting will be held on April 28, 2010, at 10:00 A.M., Central Time, at the Doubletree Guest Suites Houston located at 5353 Westheimer Road, Houston, Texas 77056. Your vote on these matters is important, regardless of the number of shares of ICO common stock you own, and all ICO shareholders are invited to attend the special meeting in person. Whether or not you plan to attend the special meeting in person, it is important that your shares of ICO common stock be represented and voted. In order to ensure your shares of ICO common stock are represented, we urge you to either execute and return the enclosed proxy, or that you promptly submit your proxy electronically through the Internet or by telephone.

 

If we complete the merger, you will receive a combination of cash and A. Schulman common stock in exchange for each share of ICO common stock you hold as of the effective time of the merger based on an exchange ratio. The amount of cash and A. Schulman common stock into which each share of ICO common stock will be converted will not be known at the time of the special meeting because the merger will not be consummated until after the special meeting. Based on the closing price of A. Schulman’s common stock on March 24, 2010, in exchange for each share of ICO common stock you own, you would be entitled to receive approximately $8.36 per share, comprised of: (1) approximately $3.63 per share in cash; and (2) approximately $4.73 in A. Schulman common stock, assuming the cash-out of all ICO stock options at their “in the money” spread based on the March 24, 2010 closing price. Both A. Schulman’s and ICO’s common stock is traded on the NASDAQ Global Select Market, which is referred to as the NASDAQ, under the symbols “SHLM” and “ICOC,” respectively. On March 24, 2010, the closing price of A. Schulman’s common stock was $25.90 and of ICO’s common stock was $8.33. Following completion of the merger, and assuming A. Schulman does not issue any additional shares of its common stock, ICO shareholders would own approximately 16% of the issued and outstanding shares of A. Schulman.

 

This proxy statement/prospectus provides you with detailed information about the proposed merger. We encourage you to read the entire document carefully, including the “RISK FACTORS” section beginning on page 21 for a discussion of risks relevant to the merger.

 

We believe this merger will result in a strong combined company that will deliver world-class products and superior results to its stockholders and customers.

 

 

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the merger or the A. Schulman common stock to be issued in the merger or determined if this proxy statement/prospectus is accurate or complete. Any representation to the contrary is a criminal offense.

 

This proxy statement/prospectus is dated March 25, 2010, and is first being mailed to ICO shareholders on or about March 29, 2010.

 

REFERENCES TO ADDITIONAL INFORMATION

 

This proxy statement/prospectus incorporates important business and financial information about A. Schulman and ICO from other documents that each company has filed with the Securities and Exchange Commission, which is referred to as the SEC, that are not included in or delivered with this proxy statement/prospectus. This information is available to you without charge upon your request. You can obtain the documents incorporated by reference into this proxy statement/prospectus by requesting them in writing or by telephone from the appropriate company at the following addresses and telephone numbers:

 

 

You can also obtain the documents incorporated by reference into this proxy statement/prospectus by accessing the SEC’s website maintained at http://www.sec.gov.

 

For a more detailed discussion of the information about A. Schulman and ICO incorporated by reference into this proxy statement/prospectus, see the section titled “WHERE YOU CAN FIND MORE INFORMATION” beginning on page 124.

 

In order to receive timely delivery of the documents in advance of the special meeting, you should make your request no later than April 21, 2010, which is five business days prior to the date of the special meeting.

 

A. Schulman has supplied all information contained in this proxy statement/prospectus relating to A. Schulman, and ICO has supplied all information contained in this proxy statement/prospectus relating to ICO.

 

You should rely only on the information which is contained in this proxy statement/prospectus or to which we have referred in this proxy statement/prospectus. We have not authorized anyone to provide you with information that is different. You should not assume that the information contained in this proxy statement/prospectus is accurate as of any date other than the date of this proxy statement/prospectus.

 

1811 BERING DRIVE, SUITE 200
HOUSTON, TEXAS 77057

 

NOTICE OF SPECIAL MEETING OF SHAREHOLDERS

TO BE HELD ON APRIL 28, 2010

 

Notice is hereby given that ICO will hold a special meeting of its shareholders at the Doubletree Guest Suites Houston located at 5353 Westheimer Road, Houston, Texas 77056, on April 28, 2010, beginning at 10:00 A.M., Central Time, for the purpose of considering and voting on the following matters:

 

1. A proposal to approve the merger agreement, dated as of December 2, 2009, by and among A. Schulman, ICO and Wildcat Spider, LLC, which is referred to as Wildcat, a wholly-owned subsidiary of A. Schulman;

 

2. A proposal to approve the adjournment of the special meeting, if necessary, to solicit additional proxies in the event there are not sufficient votes at the time of the special meeting to approve the merger agreement; and

 

3. Any other business that properly comes before the special meeting or any adjournment or postponement of the special meeting. The ICO board of directors is unaware of any other business to be transacted at the special meeting.

 

These items of business are described in this proxy statement/prospectus. Holders of record of shares of ICO common stock at the close of business on March 17, 2010, are entitled to notice of, and to vote at, the special meeting and any adjournment or postponement thereof.

 

A copy of the merger agreement is attached as Annex A to this proxy statement/prospectus.

 

Your vote is very important, regardless of the number of shares of ICO common stock you own. If you do not return or submit your proxy or vote at the special meeting as provided in this proxy statement/prospectus, the effect will be the same as a vote “AGAINST” the proposal to approve the merger agreement. Whether or not you intend to be present at the special meeting, we urge you to complete, date, sign and return promptly the accompanying proxy. A reply envelope is provided for this purpose, which needs no postage if mailed in the United States. Alternatively, certain ICO shareholders may authorize their proxy or direct their vote by telephone or the Internet as described in this proxy statement/prospectus. You may revoke the proxy at any time prior to its exercise at the special meeting in the manner described in this proxy statement/prospectus. Completing a proxy will not prevent you from being able to vote at the special meeting by attending in person and casting your vote. Your vote at the special meeting will supersede any previously submitted proxy.

 

The ICO board of directors unanimously recommends that you vote “FOR” the proposal to approve the merger agreement and “FOR” the approval of the adjournment of the special meeting, if necessary, to solicit additional proxies. In considering the recommendation of the ICO board of directors with respect to the merger agreement, ICO shareholders should be aware that ICO directors will directly benefit from the merger. For a more complete description of these interests, see the information provided in the section titled “THE MERGER — Interests of ICO Directors and Executive Officers in the Merger” beginning on page 70.

By Order of the Board of Directors,

 

 

Gregory T. Barmore

Chairman of the Board

 

 

A. John Knapp, Jr.

President and Chief Executive Officer

 

 

 

 

TABLE OF CONTENTS

 

 

 

 

SUMMARY

 

The Companies (beginning on page 42)

 

The Merger (beginning on page 42)

 

A. Schulman’s Reasons for the Merger (beginning on page 52)

 

ICO’s Reasons for the Merger (beginning on page 54)

 

Opinion of ICO’s Financial Advisor (beginning on page 61)

 

Merger Consideration (beginning on page 83)

	•	an amount, subject to adjustments, equal to the quotient, rounded down to the nearest whole cent, of (a) $105 million less amounts paid or to be paid with respect to outstanding ICO stock options, less cash amounts paid or to be paid by ICO to purchase, redeem or otherwise acquire any shares of ICO common stock or other equity securities (including ICO stock options) of ICO or its subsidiaries, in each case, after the date of the merger agreement and prior to the effective time of the merger and less amounts to be paid with respect to holders of ICO common stock that properly exercise rights of dissent and appraisal, as described in the section titled “THE MERGER — Appraisal Rights of Dissenting ICO Shareholders” beginning on page 76, divided by (b) the number of outstanding shares of ICO common stock less the number of dissenting shares of ICO common stock; and
	•	a number of shares of A. Schulman common stock, subject to adjustments, equal to the exchange ratio, which is the quotient of (a) 5,100,000 shares of A. Schulman common stock divided by (b) the number of outstanding shares of ICO common stock less the number of dissenting shares of ICO common stock.

 

The Special Meeting (beginning on page 40)

	•	to consider and vote on a proposal to approve the merger agreement;
	•	to consider and vote on a proposal to adjourn the special meeting, if necessary, to satisfy the conditions to completing the merger as set forth in the merger agreement, including for the purpose of soliciting proxies to vote in favor of the approval of the merger agreement; and
	•	to transact such other business as may properly come before the special meeting or any adjournment or postponement of the special meeting.

 

Recommendation of the ICO Board of Directors

 

Record Date for the Special Meeting and Voting Rights (beginning on page 40)

 

Quorum; Required Votes; Abstentions and Broker Non-Votes (beginning on page 40)

 

Stock Ownership of Directors and Executive Officers of A. Schulman and ICO (beginning on page 69)

Ownership of A. Schulman After the Merger (beginning on page 69)

Interests of ICO Directors and Executive Officers in the Merger (beginning on page 70)

		Paid or Payable
Executive Officers		in Cash				Total
A. John Knapp, Jr.		$	857,667			$	1,224,426
Stephen E. Barkmann		$	930,981			$	1,330,595
Derek Bristow		$	883,370			$	1,247,580
Bradley T. Leuschner		$	640,477			$	737,262
Donald E. Parsons		$	629,080			$	799,360
Charlotte Fischer Ewart		$	579,930			$	631,960
Directors
Gregory T. Barmore		$	40,670			$	83,240
Eugene Allspach		$	0			$	0
Eric O. English		$	87,120			$	200,640
David E. K. Frischkorn, Jr.		$	87,120			$	200,640

		Paid or Payable
Directors		in Cash				Total
Daniel R. Gaubert		$	46,827			$	107,844
Max W. Kloesel		$	7,400			$	7,400
Kumar Shah		$	67,827			$	128,844
Warren W. Wilder		$	46,827			$	107,844
Directors and Executive Officers Total		$	4,905,295			$	6,807,635

 

Listing of A. Schulman Common Stock and Delisting of ICO Common Stock (beginning on page 75)

 

Appraisal Rights of Dissenting ICO Shareholders (beginning on page 76)

 

Conditions to Completion of the Merger (beginning on page 97)

	•	approval of the merger agreement by the ICO shareholders at the special meeting;
	•	expiration or termination of the waiting period (including any extension thereof) applicable to the consummation of the merger under the Hart-Scott-Rodino Act, which is referred to as the HSR Act;
	•	making or obtaining consents, approvals, and actions of, filings with and notices to, the governmental entities required to consummate the merger and the other transactions contemplated by the merger agreement, the failure of which to be made or obtained is reasonably expected to have or result in a material adverse effect on A. Schulman or ICO;
	•	absence of any order or law of any governmental entity preventing the consummation of the merger;
	•	approval for listing on the NASDAQ, upon official notice of issuance, of A. Schulman common stock to be issued in connection with the merger;
	•	continued effectiveness of the registration statement of which this proxy statement/prospectus is a part and the absence of any stop order, or proceeding seeking a stop order, by the SEC suspending the effectiveness of the registration statement of which this proxy statement/prospectus is a part;

	•	accuracy of each party’s representations and warranties in the merger agreement, except as would not reasonably be expected to have or result in a material adverse effect on the party making the representations;
	•	performance in all material respects of each party’s covenants set forth in the merger agreement required to be performed by it at or prior to the closing date of the merger;
	•	receipt by each of A. Schulman and ICO of a tax opinion, dated as of the closing date of the merger, to the effect that the merger will constitute a reorganization and that such party will be a party to such reorganization for United States federal income tax purposes; and
	•	delivery by both parties of customary officer’s certificates.

 

Termination of the Merger Agreement (beginning on page 98)

	•	by the mutual written consent of A. Schulman, Wildcat and ICO; or
	•	by either A. Schulman or ICO if:

	•	the parties fail to consummate the merger on or before July 1, 2010, or such later date, if any, as A. Schulman and ICO may agree upon in writing, which is referred to as the outside date, unless the failure to consummate the merger by July 1, 2010 or such later date is the result of a breach of the merger agreement by the party seeking the termination; provided that if all conditions to the closing have been fulfilled other than those described in the second and third bullets under the section titled “THE MERGER AGREEMENT — Conditions to Completion of the Merger” beginning on page 97 relating to consents, approvals and actions of, filings with and notices to, the governmental entities required to consummate the merger and the expiration or termination of the applicable waiting period (including any extension thereof) under the HSR Act, the outside date will be automatically extended from July 1, 2010 to September 1, 2010; or
	•	the special meeting has concluded, the ICO shareholders have voted and the approval of the merger agreement by the ICO shareholders was not obtained; or

	•	by ICO if:

	•	either A. Schulman or Wildcat breaches its representations or warranties or breaches or fails to perform its covenants set forth in the merger agreement, which breach or failure to perform results in a failure of the related conditions to the consummation of the merger being satisfied and such breach or failure to perform is not cured within 30 days after the receipt of written notice thereof or is incapable of being cured by the outside date; or
	•	prior to the receipt of ICO’s shareholder approval of the merger agreement, ICO enters into an acquisition agreement with a third party providing for the implementation of the transactions contemplated by a superior proposal, if ICO’s board of directors has determined in good faith that the failure to do so would be reasonably likely to be inconsistent with its fiduciary duties under law and ICO has satisfied the procedures described in the last three bullets under the section titled “THE MERGER AGREEMENT — Special Meeting and Board Recommendation” beginning on page 93; provided that ICO must pay the termination fee to A. Schulman described below in the section titled “THE MERGER AGREEMENT — Termination Fees and Expense Reimbursement” beginning on page 100 at the time of the termination and the superior proposal must not have resulted from ICO’s breach of its non-solicitation obligations under the merger agreement in any material respect, its breach of its covenant to convene the special meeting (other than immaterial breaches) or its breach of its obligation to recommend that the ICO shareholders vote in favor of the approval of the merger agreement; or

	•	by A. Schulman if:

	•	ICO breaches its representations or warranties or breaches or fails to perform its covenants set forth in the merger agreement, which breach or failure to perform results in a failure of the related conditions to the consummation of the merger being satisfied, provided such breach or failure to perform is not cured within 30 days after receipt of a written notice thereof or is incapable of being cured by the outside date;
	•	the ICO board of directors or any committee thereof has made a company adverse recommendation change;
	•	ICO has breached its obligations not to solicit alternative takeover proposals in any material respect, its covenant to convene the special meeting (other than immaterial breaches) or its obligation to recommend that the ICO shareholders vote in favor of the approval of the merger agreement;
	•	within 10 business days of the public announcement of a company takeover proposal, the ICO board of directors fails to reaffirm (publicly, if so requested by A. Schulman) its recommendation in favor of the approval of the merger agreement, subject to a maximum aggregate extension (when combined with extensions under the bullet below) of five business days under certain circumstances; or
	•	within 10 business days after a tender or exchange offer relating to the securities of ICO has first been published or announced, ICO has not sent or given to ICO shareholders a statement disclosing that the ICO board of directors recommends rejection of such tender or exchange offer, subject to a maximum aggregate extension (when combined with extensions under the bullet above) of five business days under certain circumstances.

 

Termination Fees and Expense Reimbursement (beginning on page 100)

 

Material United States Federal Income Tax Consequences (beginning on page 79)

 

Financing of the Merger (beginning on page 78)

 

Accounting Treatment of the Merger (beginning on page 78)

 

Regulatory Approvals (beginning on page 78)

 

Risk Factors (beginning on page 21)

 

Comparison of Stockholder Rights and Related Matters (beginning on page 113)

 

MARKET PRICE AND DIVIDEND INFORMATION

A.	SCHULMAN

		Price Range of Common Stock
Quarter Ended:		High				Low				Dividends
May 31, 2010 (through March 24, 2010)		$	26.49			$	24.18			$	—
February 28, 2010		$	23.98			$	16.42			$	0.15
November 30, 2009		$	21.13			$	16.32			$	0.15
August 31, 2009		$	22.01			$	14.45			$	0.15
May 31, 2009		$	15.69			$	12.08			$	0.15
February 28, 2009		$	18.16			$	12.65			$	0.15
November 30, 2008		$	24.10			$	12.02			$	0.15
August 31, 2008		$	24.21			$	21.32			$	0.15
May 31, 2008		$	22.59			$	19.75			$	0.15
February 29, 2008		$	22.78			$	19.03			$	0.145
November 30, 2007		$	23.92			$	19.53			$	0.145
August 31, 2007		$	25.95			$	19.82			$	0.145
May 31, 2007		$	24.26			$	20.31			$	0.145
February 28, 2007		$	23.03			$	19.90			$	0.145

 

ICO

		Price Range of Common Stock
Quarter Ended:		High				Low				Dividends
March 31, 2010 (through March 24, 2010)		$	8.49			$	7.34			$	0.037
December 31, 2009		$	7.34			$	3.62			$	0.05
September 30, 2009		$	5.14			$	2.29			$	—
June 30, 2009		$	3.28			$	1.90			$	—
March 31, 2009		$	4.16			$	1.03			$	—
December 31, 2008		$	5.95			$	2.33			$	—
September 30, 2008		$	6.72			$	4.56			$	—
June 30, 2008		$	8.36			$	5.89			$	—
March 31, 2008		$	13.73			$	6.65			$	—
December 31, 2007		$	16.50			$	9.66			$	—
September 30, 2007		$	15.56			$	8.00			$	—
June 30, 2007		$	10.64			$	5.95			$	—
March 31, 2007		$	6.56			$	4.77			$	—
December 31, 2006		$	7.98			$	5.09			$	—

 

SELECTED HISTORICAL FINANCIAL INFORMATION

A.	Schulman Historical Financial Information

		As of and for the Three
		Months Ended November 30,								As of and for the Year Ended August 31,
		2009(1)				2008(1)				2009				2008				2007				2006				2005
		(Unaudited)
		(In thousands, except per share data)
Operations:
Net sales		$	362,861			$	388,317			$	1,279,248			$	1,983,595			$	1,786,892			$	1,616,380			$	1,433,196
Income from continuing operations		$	17,138			$	9,397			$	11,180			$	30,668			$	27,807			$	35,022			$	32,093
Net income (loss)		$	17,135	(2)		$	8,330	(3)		$	(2,776	)(4)		$	18,049	(5)		$	22,069			$	32,662			$	32,093
Share Data:
Average number of common stock outstanding, net of treasury shares:
Diluted			26,056				26,026				26,070				27,098				27,369				30,394				31,050
Per Share Data:
Diluted earnings per common share:
Net income from continuing operations		$	0.65			$	0.35			$	0.43			$	1.13			$	1.01			$	1.15			$	1.03
Loss from discontinued operations		$	—			$	(0.04	)		$	(0.54	)		$	(0.47	)		$	(0.21	)		$	(0.08	)		$	—
Net income (loss)		$	0.65			$	0.31			$	(0.11	)		$	0.66			$	0.80			$	1.07			$	1.03
Common stock dividends declared		$	0.15			$	0.15			$	0.60			$	0.59			$	0.58			$	0.58			$	0.57
Balance Sheet Data:
Cash and equivalents		$	237,021			$	115,763			$	228,674			$	97,728			$	43,045			$	50,662			$	102,329
Working capital, excluding cash		$	154,918			$	232,475			$	133,143			$	305,160			$	375,479			$	353,125			$	303,383
Total assets		$	862,710			$	774,183			$	797,489			$	890,421			$	874,115			$	843,245			$	784,362
Long-term debt		$	105,651			$	99,221			$	102,254			$	104,298			$	123,080			$	120,730			$	63,158
Total stockholders’ equity		$	392,584			$	372,547			$	366,070			$	425,231			$	424,663			$	401,692			$	460,303

(1)		A. Schulman’s November 30, 2009 and November 30, 2008 operations and per share data reflect the adoption of Accounting Standards Codification 810-10-65, which is referred to as ASC 810-10-65, related to the presentation and disclosure of noncontrolling interests. The historical fiscal years presented from fiscal 2005 through fiscal 2009 were not restated to reflect the adoption of ASC 810-10-65 due to the immaterial impact on the consolidated results of the noncontrolling interests. A Schulman will continue to prospectively apply its adoption of ASC 810-10-65-1 and will revise comparable periods in its future SEC filings.
(2)		The net income for the three months ended November 30, 2009 includes $2.3 million of costs related to this merger and $0.4 million related to restructuring activities and asset impairment charges.

(3)		The net income for the three months ended November 30, 2008 includes $0.5 million related to restructuring activities and other employee termination costs.
(4)		The net loss for 2009 includes $9.5 million of after-tax restructuring charges, accelerated depreciation related to restructuring activities and other employee termination costs, after-tax asset impairment charges of $12.5 million and after-tax curtailment gains of $2.7 million for a net impact of approximately $19.3 million. In addition, the translation effect of foreign currencies decreased net income for 2009 by $7.3 million.
(5)		Net income for 2008 includes $6.8 million of after-tax restructuring and other employee termination charges, after-tax asset impairment charges of $10.8 million, after-tax goodwill impairment of $1.0 million, after-tax CEO transition costs of $3.6 million and a curtailment gain of $4.0 million for a net impact of approximately $18.2 million.

 

ICO Historical Financial Information

		As of and for the Three
		Months Ended December 31,								As of and for the Year Ended September 30,
		2009				2008				2009				2008				2007				2006				2005
		(Unaudited)
		(In thousands, except for per share data)
Statement of Operations Data:
Revenues		$	85,371			$	79,358			$	299,965			$	446,701			$	417,917			$	324,331			$	296,606
Income from continuing operations		$	1,046			$	(1,076	)		$	(1,239	)		$	15,382			$	19,762			$	13,463			$	5,002
Net income		$	1,046			$	(1,076	)		$	(1,239	)		$	15,314			$	21,118			$	12,004			$	4,505
Preferred stock dividends		$	—			$	—			$	—			$	(1	)		$	(554	)		$	(2,176	)		$	(2,176	)
Net gain on redemption of preferred stock		$	—			$	—			$	—			$	—			$	6,023			$	—			$	—
Net income (loss) applicable to common stock		$	1,046			$	(1,076	)		$	(1,239	)		$	15,313			$	26,587			$	9,828			$	2,329
Earnings (Loss) Per Share:
Diluted
Earnings from continuing operations		$	0.04			$	(0.04	)		$	(0.05	)		$	0.55			$	0.71			$	0.43			$	0.11
Earnings (loss) from discontinued operations		$	—			$	—			$	—			$	—			$	0.05			$	(0.06	)		$	(0.02	)
Earnings (loss) per common share		$	0.04			$	(0.04	)		$	(0.05	)		$	0.55			$	0.76			$	0.37			$	0.09
Weighted average shares outstanding (diluted)			28,025				27,412				27,081				27,994				27,891				26,255				25,816
Balance Sheet Data:
Cash and equivalents		$	13,921			$	10,975			$	21,880			$	5,589			$	8,561			$	17,427			$	3,234
Working capital, excluding cash		$	47,619			$	47,523			$	42,213			$	61,412			$	49,297			$	40,074			$	38,148
Total assets		$	187,361			$	188,541			$	192,273			$	221,096			$	246,217			$	197,961			$	164,255
Long-term debt, net of current portion		$	16,420			$	23,207			$	18,823			$	25,122			$	29,605			$	21,559			$	18,993
Shareholders’ equity		$	105,365			$	99,223			$	105,155			$	107,835			$	91,042			$	91,717			$	77,090

 

Selected Unaudited Pro Forma Combined Financial Information

		Year Ended				Three Months Ended
		August 31,				November 30,
		2009				2009
		(In thousands, except for share and per share data)
Selected Unaudited Pro Forma Condensed Combined Statements of Operations Data:
Net sales		$	1,579,213			$	448,232
Net income from continuing operations		$	10,891			$	21,800
Share Data:
Average number of common stock outstanding, net of treasury shares:
Basic			30,890,421				30,943,346
Diluted			31,169,631				31,155,586
Per Share Data:
Diluted earnings from continuing operations per common share		$	0.35			$	0.70
Common stock dividends declared		$	0.60			$	0.15

		As of November 30,
		2009
		(In thousands)
Balance Sheet Data:
Cash and equivalents		$	102,377
Working capital, excluding cash		$	219,339
Total assets		$	988,286
Long-term debt		$	105,651
Total equity		$	471,389

 

Comparative Per Share Market Price

		A. Schulman				ICO				A. Schulman				ICO
		Fiscal Year				Fiscal Year				Three Months				Three Months
		Ended				Ended				Ended				Ended
		August 31,				September 30,				November 30,				December 31,
		2009				2009				2009				2009
Historical diluted income (loss) from continuing operations per common share		$	0.43			$	(0.05	)		$	0.65			$	0.04
Dividends declared per common share		$	0.60			$	—			$	0.15			$	0.05
Book value per share		$	14.03			$	3.81			$	15.04			$	3.80
Unaudited diluted pro forma income from continuing operations per common share		$	0.35			$	0.06	(1)		$	0.70			$	0.13	(1)
Pro forma dividends declared per common share		$	0.60			$	0.11	(1)		$	0.15			$	0.03	(1)
Pro forma book value per share		$	14.04	(2)		$	2.58	(1)		$	14.95	(2)		$	2.75	(1)

(1)		The pro forma ICO equivalent per share amounts were calculated by applying an exchange ratio of 0.184 as described in Note 4 — Estimate of Consideration Expected to be Transferred to the “NOTES TO THE UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS” beginning on page 106, to the pro forma combined income from continuing operations, dividends declared per common share and book value per common share. The exchange ratio used in this pro forma table reflects the value of the per share merger consideration, exclusive of the cash portion of $3.67 (calculated assuming a December 2, 2009 closing date). The final ratio of the per share merger consideration to the value of a share of A. Schulman common stock will vary based on the trading price of A. Schulman common stock.
(2)		Amount is calculated by dividing A. Schulman pro forma stockholder’s equity by total common stock outstanding including the additional shares to be issued as partial consideration for the merger.

 

Comparative Market Value Information

	•	the historical price per share of each A. Schulman common stock and ICO common stock; and
	•	the equivalent price per share and equivalent market value of shares of ICO common stock,

		A. Schulman				ICO				ICO
		Historical				Historical				Equivalent
December 2, 2009
Closing price per share of common stock		$	16.95			$	4.50			$	6.79	(1)
Market value of common stock (in thousands)(2)		$	442,435			$	124,672				N/A
March 24, 2010
Closing price per share of common stock		$	25.90			$	8.33			$	8.36	(3)
Market value of common stock (in thousands)(4)		$	683,000			$	232,601				N/A

(1)		The ICO equivalent price per share is equal to the sum of: (a) the closing price of A. Schulman’s common stock on the applicable date multiplied by an exchange ratio of 0.184; and (b) $3.67. The exchange ratio and cash consideration used in this comparative market value table reflects the value of the per share merger consideration calculated assuming a December 2, 2009 closing date. The final ratio of the per share merger consideration to the value of a share of A. Schulman common stock will vary based on the trading price of A. Schulman common stock, among other things.
(2)		Based on 26,102,352 shares of A. Schulman common stock and 27,704,950 shares of ICO common stock outstanding as of December 2, 2009 (excluding outstanding shares held in treasury).
(3)		The ICO equivalent price per share is equal to the sum of: (a) the closing price of A. Schulman’s common stock on the applicable date multiplied by an exchange ratio of 0.184; and (b) $3.63. The exchange ratio and cash consideration used in this comparative market value table reflects the value of the per share merger consideration calculated assuming a March 24, 2010 closing date. The final ratio of the per share merger consideration to the value of a share of A. Schulman common stock will vary based on the trading price of A. Schulman common stock, among other things.
(4)		Based on 26,382,240 shares of A. Schulman common stock and 27,923,340 shares of ICO common stock outstanding as of March 24, 2010 (excluding outstanding shares held in treasury).

RISK FACTORS

 

In deciding whether to vote for the approval of the merger agreement, we urge you to carefully consider all of the information included or incorporated by reference in this proxy statement/prospectus, which are listed in the section titled “WHERE YOU CAN FIND MORE INFORMATION” beginning on page 124. You should also read and consider the risks associated with each of the businesses of A. Schulman and ICO because these risks will also affect the combined company. The risks associated with the business of A. Schulman can be found in the A. Schulman Annual Report on Form 10-K for the fiscal year ended August 31, 2009, which is incorporated by reference in this proxy statement/prospectus. The risks associated with the business of ICO can be found in the ICO Annual Report on Form 10-K for the fiscal year ended September 30, 2009, which is incorporated by reference in this proxy statement/prospectus. In addition, we urge you to carefully consider the following material risks relating to the merger, the business of A. Schulman, the business of ICO and the business of the combined company.

Risks Relating to the Merger

 

The parties may fail to realize all of the anticipated benefits of the merger, which could reduce A. Schulman’s profitability.

 

The parties expect that the merger of ICO will result in certain synergies, business opportunities and growth prospects. A. Schulman, however, may never realize these expected synergies, business opportunities and growth prospects at the expected levels or at all. Integrating operations will be complex and will require significant efforts and expenses on the part of both A. Schulman and ICO. Personnel may leave or be terminated because of the merger. A. Schulman’s management may have its attention diverted while trying to integrate ICO. In addition, A. Schulman may experience increased competition that limits its ability to expand its business. A. Schulman may not be able to capitalize on expected business opportunities including retaining ICO’s current customers, assumptions underlying estimates of expected cost savings may be inaccurate or general industry and business conditions may deteriorate. If these factors limit A. Schulman’s ability to integrate the operations of ICO successfully or on a timely basis, A. Schulman’s expectations of future results of operations, including certain cost savings and synergies expected to result from the merger, may not be met. In addition, A. Schulman’s growth and operating strategies for ICO’s business may be different from the strategies that ICO currently is pursuing.

 

Because the market price of shares of A. Schulman common stock will fluctuate, ICO shareholders cannot be sure of the value of the merger consideration they will receive.

 

In the merger, each share of ICO common stock (other than shares of ICO common stock held in treasury by ICO, owned by A. Schulman or held by any ICO shareholder that has properly exercised rights of dissent and appraisal in accordance with the TBOC) will be converted into the right to receive a combination of cash and A. Schulman common stock, the details of which are described in the section titled “THE MERGER AGREEMENT — Merger Consideration” beginning on page 83. The price of shares of A. Schulman common stock at the closing date of the merger or when the shares of A. Schulman common stock are received by ICO shareholders may vary from their respective prices on the date of this proxy statement/prospectus and on the date of the special meeting. As a result, ICO shareholders will not know the exact value of the shares of A. Schulman common stock that will be issued in the merger at the time they vote on the merger proposal.

 

In addition, because the amount of cash to be paid and the number of shares of A. Schulman common stock to be issued in the merger are fixed, and because the holders of ICO common stock that properly exercise rights of dissent and appraisal and unexercised “in the money” ICO stock options will be paid only in cash in respect of their shares or options, the cash consideration per share and the stock consideration per share that ICO shareholders will be entitled to receive will depend on the closing price of A. Schulman common stock, the number of dissenting shares of ICO common stock and the number of unexercised “in the money” ICO stock options that remain outstanding at the effective time of the merger. For example, a higher average closing price of shares of A. Schulman common stock, coupled with the existence of either dissenting shares of ICO common stock or unexercised “in the money” ICO stock options, will result in per share merger consideration consisting of A. Schulman common stock with a higher market value and less cash consideration. Conversely, a lower

average closing price of shares of A. Schulman common stock, coupled with the existence of either dissenting shares of ICO common stock or unexercised “in the money” ICO stock options, will result in per share merger consideration consisting of A. Schulman common stock with a lower market value and more cash consideration.

 

Share price changes may result from a variety of factors, including general market and economic conditions, changes in A. Schulman’s and ICO’s respective businesses, operations and prospects, and regulatory considerations. Many of these factors are beyond A. Schulman’s and ICO’s control. You should obtain current market quotations for shares of A. Schulman common stock and ICO common stock.

 

The market price for shares of A. Schulman common stock may be affected by factors different from, or in addition to, those affecting ICO common stock, and the market value of shares of A. Schulman common stock may decrease after the closing date of the merger.

 

The businesses of A. Schulman and ICO differ in some respects and, accordingly, the results of operations of the combined company and the market price of the shares of the combined company’s common stock may be affected by factors different from those currently affecting the independent results of operations of each of A. Schulman and ICO. In addition, the market value of the shares of A. Schulman common stock that ICO shareholders receive in the merger could decrease following the closing date of the merger. For a discussion of the business of A. Schulman and factors to consider in connection with its business, please see the section titled “THE MERGER — The Companies” beginning on page 42 and the documents and information included elsewhere in this proxy statement/prospectus or incorporated by reference into this proxy statement/prospectus and listed under the section titled “WHERE YOU CAN FIND MORE INFORMATION” beginning on page 124. For a discussion of the business of ICO and factors to consider in connection with its business, please see the section titled “THE MERGER — The Companies” beginning on page 42 and the documents and information incorporated by reference into this proxy statement/prospectus and listed under the section titled “WHERE YOU CAN FIND MORE INFORMATION” beginning on page 124.

 

A. Schulman stockholders’ ownership percentage after the merger will be diluted and the merger could result in dilution to A. Schulman’s earnings per share.

 

In connection with the merger, A. Schulman will issue to ICO shareholders shares of A. Schulman common stock. As a result of this stock issuance, A. Schulman stockholders will own a smaller percentage of the combined company. It is estimated that, upon completion of the merger, A. Schulman stockholders will own approximately 84% of the outstanding stock of the combined company and ICO shareholders will own approximately 16% of the outstanding stock of the combined company. If the combined company is unable to realize the strategic and financial benefits currently anticipated to result from the merger, then A. Schulman stockholders could experience dilution of their economic interest in A. Schulman without receiving a commensurate benefit. The merger could also result in dilution to A. Schulman’s earnings per share.

 

Obtaining required approvals and satisfying closing conditions may prevent or delay completion of the merger.

 

The merger is subject to customary conditions to closing. These closing conditions include, among others, the receipt of required approvals of the shareholders of ICO and the receipt of certain governmental consents and approvals. No assurance can be given that the required shareholder and governmental consents and approvals will be obtained or that the required conditions to closing will be satisfied, and, if all required consents and approvals are obtained and the conditions are satisfied, no assurance can be given as to the terms, conditions and timing of the consents and approvals. A. Schulman and ICO will also be obligated to pay certain investment banking, financing, legal and accounting fees and related expenses in connection with the merger, whether or not the merger is completed.

 

Failure to retain key employees could diminish the anticipated benefits of the merger.

 

The success of the merger will depend in part on the retention of personnel critical to the business and operations of the combined company due to, for example, their technical skills or management expertise.

Employees may experience uncertainty about their future role with ICO and A. Schulman until strategies with regard to these employees are announced or executed. If ICO and A. Schulman are unable to retain personnel, including ICO’s key management, technical and sales personnel, who are critical to the successful integration and future operations of the companies, ICO and A. Schulman could face disruptions in their operations, loss of existing customers, loss of key information, expertise or know-how, and unanticipated additional recruitment and training costs. In addition, the loss of key personnel could diminish the anticipated benefits of the merger.

 

Uncertainty regarding the merger may cause customers, suppliers or strategic partners to delay or defer decisions concerning A. Schulman and ICO and adversely affect each company’s ability to effectively manage their respective businesses.

 

The merger will happen only if stated conditions are met, including the approval of the merger proposal by ICO’s shareholders, the receipt of regulatory approvals, and the absence of any material adverse effect in the business of ICO or A. Schulman. Many of the conditions are outside the control of ICO and A. Schulman, and both parties also have stated rights to terminate the merger agreement. Accordingly, there may be uncertainty regarding the completion of the merger. This uncertainty may cause customers, suppliers or strategic partners to delay or defer decisions concerning ICO or A. Schulman, which could negatively affect their respective businesses. Any delay or deferral of those decisions or changes in existing agreements could have a material adverse effect on the respective businesses of ICO and A. Schulman, regardless of whether the merger is ultimately completed.

 

The fairness opinion obtained by ICO from its financial advisor will not reflect changes in circumstances between signing the merger agreement and the completion of the merger.

 

ICO has not obtained an updated opinion regarding the fairness of the merger consideration as of the date of this proxy statement/prospectus from J.P. Morgan, ICO’s financial advisor. J.P. Morgan’s opinion speaks only as of its date and does not address the fairness of the merger consideration, from a financial point of view, at the time the merger is completed. Changes in the operations and prospects of A. Schulman or ICO, general market and economic conditions and other factors that may be beyond the control of A. Schulman and ICO, and on which the fairness opinion was based, may alter the value of A. Schulman or ICO or the prices of shares of A. Schulman common stock or ICO common stock by the time the merger is completed. For a description of the opinion that ICO received from its financial advisor, please see the section titled “THE MERGER — Opinion of ICO’s Financial Advisor” beginning on page 61.

 

Whether or not the merger is completed, the announcement and pendency of the merger could cause disruptions in the businesses of A. Schulman and ICO, which could have an adverse effect on their respective businesses and financial results.

 

Whether or not the merger is completed, the announcement and pendency of the merger could cause disruptions in the businesses of A. Schulman and ICO. Specifically:

 

 

In addition, A. Schulman and ICO have each diverted significant management resources in an effort to complete the merger and are each subject to restrictions contained in the merger agreement on the conduct of their respective businesses. If the merger is not completed, A. Schulman and ICO will have incurred significant costs, including the diversion of management resources, for which they will have received little or no benefit. Further, ICO may be required to pay to A. Schulman a termination fee of $6.8 million if the merger agreement is terminated, depending on the specific circumstances of the termination. For a detailed description of the circumstances in which such termination fee will be paid, see the section titled “THE MERGER AGREEMENT — Termination Fees and Expense Reimbursement” beginning on page 100.

Certain directors and executive officers of ICO have interests and arrangements that may be different from, or in addition to, those of ICO shareholders.

 

When considering the recommendation of the ICO board of directors with respect to the approval of the merger agreement, ICO shareholders should be aware that some directors and executive officers of ICO have interests in the merger that may be different from, or in addition to, their interests as ICO shareholders and the interests of ICO shareholders generally. These interests include, among others, payments under employment agreements and severance agreements, acceleration of vesting and exercisability of options and restricted shares as a result of the merger and the right to continued indemnification and insurance coverage by A. Schulman for acts or omissions occurring prior to the merger.

 

In addition, under the merger agreement, as of the closing date of the merger, the A. Schulman board of directors will take all actions as may be required to appoint Gregory T. Barmore and Eugene R. Allspach to A. Schulman’s board of directors. Messrs. Barmore and Allspach currently serve on the board of directors of ICO. For more information, see the section titled “THE MERGER — A. Schulman Board of Directors and Executive Officers After the Merger” beginning on page 69.

 

As a result of these interests, these directors and executive officers may be more likely to support and to vote to approve the merger agreement than if they did not have these interests. ICO shareholders should consider whether these interests may have influenced those directors and executive officers to support or recommend approval of the merger agreement. As of the close of business on March 24, 2010, ICO directors and executive officers were entitled to vote 9.0% of the then-outstanding ICO common stock. For more information, see the section titled “THE MERGER — Interests of ICO Directors and Executive Officers in the Merger” beginning on page 70.

 

The merger agreement contains provisions that could discourage a potential competing acquirer that might be willing to pay more to acquire or merge with ICO.

 

The merger agreement contains “no shop” provisions that restrict ICO’s ability to, among other things (each as described under the section titled “THE MERGER AGREEMENT — Covenants and Agreements” beginning on page 89):

 

 

Furthermore, there are only limited exceptions to ICO’s obligations under the merger agreement that its board of directors will not withdraw or adversely qualify its recommendation regarding the approval of the merger agreement. Although ICO’s board of directors is permitted to terminate the merger agreement in response to a superior proposal if they determine that a failure to do so would be inconsistent with their fiduciary duties, its doing so would entitle A. Schulman to collect a $6.8 million termination fee from ICO. For more information, see the sections titled “THE MERGER AGREEMENT — Termination of the Merger Agreement” beginning on page 98 and “THE MERGER AGREEMENT — Termination Fees and Expense Reimbursement” beginning on page 100.

 

These provisions could discourage a potential competing acquirer from considering or proposing an acquisition or merger, even if it were prepared to pay consideration with a higher value than that proposed to

be paid in the merger, or might result in a potential competing acquirer proposing to pay a lower per share price than it might otherwise have proposed to pay because of the added expense of the termination fee.

 

A. Schulman’s sales, profitability, operating results and cash flows are sensitive to the turbulent global economic conditions, financial markets and cyclicality, and could be adversely affected during economic downturns or financial market instability.

 

Global economic conditions and financial markets became turbulent in late 2008 and remain unstable. A. Schulman’s sales, profitability, operating results and cash flows are sensitive to these rapidly changing conditions and swings in cyclicality, and could be acutely affected, either adversely or positively, during periods of economic downturns or recovery, respectively, regardless of the brevity of such periods.

 

The businesses of most of A. Schulman’s customers, particularly A. Schulman’s industrial, automotive, construction and electronics customers, can be cyclical in nature and sensitive to drastic changes in general economic conditions as recently experienced. Financial deterioration in A. Schulman’s customers will adversely affect A. Schulman’s sales and profitability, while periods of recovery can positively affect sales and profitability, particularly after prolonged downturns. Historically, downturns in general economic conditions have resulted in diminished product demand, decreased inventories, excess manufacturing capacity and lower average selling prices, and A. Schulman may experience similar problems in the future. Historically, periods of recovery have created opportunities for gradual, sustained improvement in A. Schulman’s sales and profitability, but current drastic fluctuations in the global economic environment may yield more rapid and unpredictable periods of profitability.

 

The recent global economic crisis, especially in North America and Europe, has caused, among other things, significant reductions in available capital and liquidity from banks and other providers of credit, substantial reductions and fluctuations in equity and currency values worldwide, and concerns that the worldwide economy may enter into a prolonged recessionary period, each of which may materially adversely affect A. Schulman’s customers’ access to capital. A limit on A. Schulman’s customers’ access to capital could inhibit their willingness or ability to purchase A. Schulman’s products or affect their ability to pay for products that they have already purchased from A. Schulman.

 

In addition, turbulent global economic conditions create significant volatility to A. Schulman’s profitability, operating results and cash flows, making it difficult for A. Schulman to accurately assess future operating results. Downturns in A. Schulman’s customers’ industries, even during periods of stronger general economic conditions, could adversely affect A. Schulman’s sales, profitability, operating results and cash flows.

 

Moreover, unpredictable fluctuations in customer activity may result in dramatic short-term fluctuations, in terms of both contraction and growth, in A. Schulman’s profitability, operating results and cash flows, which may not be reflective of A. Schulman’s potential long-term financial performance. Although no one customer currently comprises a significant portion of A. Schulman’s sales, A. Schulman is exposed to certain industries such as automotive, appliances and construction. Bankruptcies by major original equipment manufacturers, which are referred to as OEMs, for the automotive market could have a cascading effect on a group of A. Schulman’s customers who supply to OEMs, directly affecting their ability to pay. Likewise, short-term government-sponsored incentive programs such as “Cash for Clunkers” in the United States and the “Srappage Scheme” in the United Kingdom can provide specific industries with brief, acute periods of recovery, and therefore heightened demand for materials from A. Schulman, creating brief periods of significant profitability for A. Schulman.

 

Similar to A. Schulman’s customers’ situation, the turbulent global economic conditions may materially adversely affect A. Schulman’s suppliers’ access to capital and liquidity with which they maintain their inventories, production levels and product quality, causing them to raise prices or lower production levels. An increase in prices could adversely affect A. Schulman’s profitability, operating results and cash flows.

 

The future of the current global financial situation is difficult to forecast and mitigate, and therefore A. Schulman’s operating results for any particular period are difficult to predict. Any of the foregoing effects

could have either acute material adverse or positive effects on A. Schulman’s business, results of operations and financial condition.

 

The negative global credit market conditions may significantly affect A. Schulman’s access to capital, cost of capital and ability to meet liquidity needs.

 

Unstable conditions in the credit markets or sustained poor financial performance may adversely impact A. Schulman’s ability to access credit already arranged and the availability and cost of credit to it in the future. A volatile credit market may limit A. Schulman’s ability to replace maturing credit arrangements and access the capital necessary to grow and maintain its business. Accordingly, A. Schulman may be forced into credit agreements that have terms that it does not prefer, which could require it to pay unattractive interest rates or limit its ability to use credit for share repurchases or payment of dividends. This could increase A. Schulman’s interest expense, decrease its profitability and significantly reduce its financial flexibility. There can be no assurances that government responses to disruptions in the financial markets will stabilize markets or increase liquidity and the availability of credit. Long-term disruptions in the capital and credit markets as a result of uncertainty, changing or increased regulation, reduced alternatives or failures of significant financial institutions could adversely affect A. Schulman’s access to liquidity needed for its business. Any disruption could require A. Schulman to take measures to conserve cash until markets stabilize or until alternative credit arrangements or other funding sources can be arranged. Such measures could include deferring, eliminating or reducing capital expenditures, dividends, future share repurchases or other discretionary uses of cash. Overall, A. Schulman’s results of operations, financial condition and cash flows could be materially adversely affected by disruptions in the credit markets.

 

Increased indebtedness could restrict growth and adversely affect A. Schulman’s financial health.

 

As of November 30, 2009, A. Schulman’s debt on a consolidated basis was approximately $108.2 million. An increase in the level of indebtedness could have significant consequences. For example, it could:

 

 

A. Schulman expects to pay expenses and to pay principal and interest on current and future debt from cash provided by operating activities. Therefore, A. Schulman’s ability to meet these payment obligations will depend on future financial performance, which is subject in part to numerous economic, business and financial factors beyond its control. If A. Schulman’s cash flow and capital resources are insufficient to fund its increased debt, it may be forced to reduce or delay expansion plans and capital expenditures, limit payment of dividends, sell material assets or operations, obtain additional capital or restructure its debt.

 

The inability to achieve, delays in achieving or achievement of less than the anticipated financial benefit from initiatives related to cost reductions and efficiency improvements could adversely affect A. Schulman’s profitability.

 

A. Schulman has announced multiple major plans and initiatives since January 2008 that are expected to reduce costs and improve efficiencies. A. Schulman could be unable to achieve, or may be delayed in achieving, all the benefits from such initiatives because of limited resources or uncontrollable economic conditions. If these

initiatives are not as successful as planned, the result could negatively impact A. Schulman’s results of operations or financial condition. Additionally, even if A. Schulman achieves these goals, it may not receive the expected benefits of the initiatives, or the costs of implementing these initiatives could exceed the related benefits.

 

An unanticipated increase in demand may result in the inability to meet customer needs and loss of sales.

 

If A. Schulman experiences an unforeseen increase in demand, it may have difficulties meeting its supply obligations to its customers due to limited capacity or delays from its suppliers. A. Schulman may lose sales as a result of not meeting the demands of its customers in the timeline required and its results of operations may be adversely affected. A. Schulman may be required to change suppliers or may need to outsource its operations where possible and, if so, it will be required to verify that the new manufacturer maintains facilities and procedures that comply with A. Schulman’s high quality standards and with all applicable regulations and guidelines.

 

If A. Schulman fails to develop and commercialize new products, its business operations would be adversely affected.

 

One driver of A. Schulman’s anticipated growth is dependent upon the successful development and commercialization of new products. The development and commercialization of new products requires significant investments in research and development, production, and marketing costs. The successful production and commercialization of these products is uncertain, as is the acceptance of the new products in the marketplace. If A. Schulman fails to successfully develop and commercialize new products, or if customers decline to purchase the new products, A. Schulman will not be able to recover its development investment and the growth prospects for its products will be adversely affected.

 

If A. Schulman is unable to retain key personnel or attract new skilled personnel, it could have an adverse effect on its business.

 

The unanticipated departure of any key member of A. Schulman’s management team or employee base could have an adverse effect on its business. In addition, because of the specialized and technical nature of its business, its future performance is dependent on the continued service of, and on its ability to attract and retain, qualified management, scientific, technical, marketing and support personnel. Competition for such personnel is intense, and A. Schulman may be unable to continue to attract or retain such personnel.

 

Price increases in raw materials and energy costs could adversely affect operating results and financial condition.

 

A. Schulman purchases various plastic resins to produce its proprietary plastic compounds. These resins, derived from petroleum or natural gas, have been subject to periods of rapid and significant movements in price. These fluctuations in price may be caused or aggravated by a number of factors, including inclement weather, political instability or hostilities in oil-producing countries and supply and demand changes. A. Schulman may not be able to pass on increases in the prices of raw materials and energy to its customers. As a result, higher petroleum or natural gas costs could lead to declining margins, operating results and financial conditions.

 

A major failure of A. Schulman’s information systems could harm its business.

 

A. Schulman depends upon several regionally integrated information systems to process orders, respond to customer inquiries, manage inventory, purchase, sell and ship goods on a timely basis, maintain cost-efficient operations, prepare financial information and reports, and operate its website. A. Schulman may experience operating problems with its information systems as a result of system failures, viruses, computer “hackers” or other causes. Any significant disruption or slowdown of its systems could cause orders to be lost or delayed and could damage its reputation with its customers or cause its customers to cancel orders, which could adversely affect its results of operations.

A. Schulman’s manufacturing operations are subject to hazards and other risks associated with polymer production and the related storage and transportation of inventories, products and wastes.

 

A. Schulman’s manufacturing operations are subject to the potential hazards and risks associated with polymer production and the related storage and transportation of inventories and wastes, including explosions, fires, inclement weather, natural disasters, mechanical failure, unscheduled downtime, transportation interruptions, remediation, chemical spills, discharges or releases of toxic or hazardous substances or gases and other risks. These hazards can cause personal injury and loss of life, severe damage to, or destruction of, property and equipment and environmental contamination. In addition, the occurrence of material operating problems at A. Schulman’s facilities due to any of these hazards may diminish its ability to meet its output goals. Accordingly, these hazards and their consequences could have a material adverse effect on A. Schulman’s operations as a whole, including its results of operations and cash flows, both during and after the period of operational difficulties.

 

Extensive environmental, health and safety laws and regulations impact A. Schulman’s operations and assets, and compliance, or lack of compliance, with these regulations could adversely affect its results of operations.

 

A. Schulman’s operations on and ownership of real property are subject to extensive environmental, health and safety laws and regulations at the federal, state and local governmental levels. The nature of A. Schulman’s business exposes it to risks of liability under these laws and regulations due to the production, storage, transportation, recycling, disposal and/or sale of materials that can cause contamination or personal injury if they are released into the environment or workplace. Environmental laws may have a significant effect on the costs of these activities involving inventory and wastes. A. Schulman may incur substantial costs, including fines, damages, criminal or civil sanctions, remediation costs or experience interruptions in its operations for violations of these laws.

 

Also, federal and state environmental statutes impose strict, and under some circumstances, joint and several liability for the cost of investigations and remedial actions on any company that generated the waste, arranged for disposal of the waste, transported the waste to the disposal site or selected the disposal site, as well as on the owners and operators of these sites. Any or all of the responsible parties may be required to bear all of the costs of clean up, regardless of fault or legality of the waste disposal or ownership of the site, and may also be subject to liability for natural resource damages. It is possible that A. Schulman could be identified as a potentially responsible party at various sites in the future, which could result in being assessed substantial investigation or clean-up costs.

 

Accruals for estimated costs, including, among other things, the ranges associated with A. Schulman’s accruals for future environmental compliance and remediation may be too low or it may not be able to quantify the potential costs. A. Schulman may be subject to additional environmental liabilities or potential liabilities that have not been identified. A. Schulman expects that it will continue to be subject to increasingly stringent environmental, health and safety laws and regulations. A. Schulman believes that compliance with these laws and regulations may, but does not currently, require significant capital expenditures and operating costs, which could adversely affect its results of operations or financial condition.

 

A. Schulman faces competition from other polymer companies, which could adversely affect its sales and financial condition.

 

A. Schulman operates in a highly competitive marketplace, competing against a number of domestic and foreign polymer producers. Competition is based on several key criteria, including product performance and quality, product price, product availability and security of supply, responsiveness of product development in cooperation with customers and customer service. Some of A. Schulman’s competitors are larger than it is and may have greater financial resources. These competitors may also be able to maintain significantly greater operating and financial flexibility than A. Schulman does. As a result, these competitors may be better able to withstand changes in conditions within the industry, changes in the prices of raw materials and energy and in general economic conditions. Additionally, competitors’ pricing decisions could compel A. Schulman to decrease its prices, which could adversely affect its margins and profitability. A. Schulman’s ability to maintain or increase its profitability is, and will continue to be, dependent upon its ability to offset decreases in the prices and margins of its products by improving production efficiency and volume, shifting to higher margin products and improving existing products

through innovation and research and development. If A. Schulman is unable to do so or to otherwise maintain its competitive position, it could lose market share to its competitors.

 

A. Schulman expects that its competitors will continue to develop and introduce new and enhanced products, which could cause a decline in the market acceptance of its products. In addition, A. Schulman’s competitors could cause a reduction in the selling prices of some of its products as a result of intensified price competition. Competitive pressures can also result in the loss of major customers. An inability to compete successfully could have an adverse effect on A. Schulman’s results of operations, financial condition and cash flows. A. Schulman may also experience increased competition from companies that offer products based on alternative technologies and processes that may be more competitive or better in price or performance, causing it to lose customers and result in a decline in its sales volume and earnings.

 

A. Schulman may incur significant charges in the event it closes all or part of a manufacturing plant or facility.

 

A. Schulman periodically assesses its manufacturing operations in order to manufacture and distribute its products in the most efficient manner. Based on its assessments, it may make capital improvements to modernize certain units, move manufacturing or distribution capabilities from one plant or facility to another plant or facility, discontinue manufacturing or distributing certain products or close all or part of a manufacturing plant or facility. A. Schulman also has shared services agreements at several of its plants and if such agreements are terminated or revised, A. Schulman would assess and potentially adjust its manufacturing operations. The closure of all or part of a manufacturing plant or facility could result in future charges that could be significant.

 

A. Schulman’s substantial international operations subject it to risks of doing business in foreign countries, which could adversely affect its business, financial condition and results of operations.

 

A. Schulman conducts more than 75% of its business outside of the United States. A. Schulman and its joint ventures currently have 12 manufacturing facilities located outside the United States. A. Schulman has facilities and offices located in Mexico, Belgium, France, Germany, Poland, Hungary, Indonesia, Italy, Spain, Switzerland, China, Luxembourg, Sweden, Turkey, South Korea, Czech Republic, Slovakia and the United Kingdom. A. Schulman expects sales from international markets to continue to represent a significant portion of its net sales. Accordingly, its business is subject to risks related to the differing legal, political, social and regulatory requirements and economic conditions of many jurisdictions. Risks inherent in international operations include the following:

 

 

 

A. Schulman’s success as a global business will depend, in part, upon its ability to succeed in differing legal, regulatory, economic, social and political conditions by developing, implementing and maintaining policies and strategies that are effective in each location where A. Schulman and its joint ventures do business.

 

Although the majority of A. Schulman’s international business operations are currently in regions where the risk level and established legal systems are similar to that in the United States, its international business also includes projects in countries where governmental corruption has been known to exist. A. Schulman emphasizes compliance with the law and has policies in place, procedures and certain ongoing training of employees with regard to business ethics and key legal requirements such as the U.S. Foreign Corrupt Practices Act, which is referred to as the FCPA; however, there can be no assurances that A. Schulman’s employees will adhere to its code of business conduct, other company policies or the FCPA. Additionally, in such high risk regions, A. Schulman’s competitors who may not be subject to U.S. laws and regulations, such as the FCPA, can gain competitive advantages over A. Schulman by securing business awards, licenses or other preferential treatment in those jurisdictions using methods that U.S. law and regulations prohibit it from using. A. Schulman may be subject to competitive disadvantages to the extent that its competitors are able to secure business, licenses or other preferential treatment by making payments to government officials and others in positions of influence. If A. Schulman fails to enforce its policies and procedures properly or maintain internal accounting practices to accurately record its international transactions, it may be subject to regulatory sanctions. Violations of these laws could result in significant monetary or criminal penalties for potential violations of the FCPA or other laws or regulations, which, in turn, could negatively affect A. Schulman’s results of operations, damage its reputation and, therefore, its ability to do business.

 

Other increases in operating costs could affect A. Schulman’s profitability.

 

Scheduled or unscheduled maintenance programs could cause significant production outages, higher costs and/or reduced production capacity at A. Schulman’s suppliers due to the industry in which they operate. These events could also affect A. Schulman’s future profitability.

 

A. Schulman’s business depends upon good relations with its employees.

 

A. Schulman may experience difficulties in maintaining appropriate relations with unions and employees in certain locations. About 50% of its employees are represented by labor unions. In addition, problems or changes affecting employees in certain locations may affect relations with its employees at other locations. The risk of labor disputes, work stoppages or other disruptions in production could adversely affect A. Schulman. If A. Schulman cannot successfully negotiate or renegotiate collective bargaining agreements or if negotiations take an excessive amount of time, there may be a heightened risk of a prolonged work stoppage. Any work stoppage could have a material adverse effect on the productivity and profitability of a manufacturing facility or on A. Schulman’s operations as a whole.

 

A. Schulman’s business and financial condition could be adversely affected if it is unable to protect its material trademarks and other proprietary information.

 

A. Schulman has numerous patents, trade secrets and know-how, domain names, trademarks and trade names. Despite A. Schulman’s efforts to protect its trademarks and other proprietary rights from unauthorized use or disclosure, other parties, including A. Schulman’s former employees or consultants, may attempt to disclose, obtain or use its proprietary information or marks without A. Schulman’s authorization. Unauthorized use of A. Schulman’s trademarks, or unauthorized use or disclosure of its other intellectual property, could negatively impact its business and financial condition.

Although A. Schulman’s pension and postretirement plans currently meet all applicable minimum funding requirements, events could occur that would require A. Schulman to make significant contributions to the plans and reduce the cash available for its business.

 

A. Schulman has several defined benefit pension and postretirement plans around the world covering most of its employees. A. Schulman is required to make cash contributions to its pension plans to the extent necessary to comply with minimum funding requirements imposed by the various countries’ benefit and tax laws. The amount of any such required contributions will be determined annually based on an actuarial valuation of the plans as performed by A. Schulman’s outside actuaries and as required by law. The amount A. Schulman may elect or be required to contribute to its pension plans in the future may increase significantly. Specifically, if year-end accumulated obligations exceed assets, A. Schulman may elect to make a voluntary contribution, over and above the minimum required, in order to avoid charges to its balance sheet and consequent reductions to shareholders’ equity. These contributions could be substantial and would reduce the cash available for its business.

 

Increasing cost of employee healthcare may decrease A. Schulman’s profitability.

 

The cost of providing healthcare coverage for A. Schulman’s employees is continually increasing. If healthcare costs continue to rise at a rapid pace, A. Schulman may not be able to or willing to pass on those costs to employees. Therefore, if A. Schulman is unable to offset continued rising healthcare costs through improved operating efficiencies and reduced expenditures, the increased costs of employee healthcare may result in declining margins and operating results.

 

Changes in tax laws could have an adverse impact on A. Schulman’s earnings.

 

Changes to tax laws, rules and regulations, including changes in the interpretation or implementation of tax laws, rules and regulations by the Internal Revenue Service or other domestic or foreign governmental bodies, could affect A. Schulman in substantial and unpredictable ways. Such changes could subject A. Schulman to additional compliance costs and tax liabilities that could have an adverse impact on its earnings. Recently, several proposals to reform U.S. tax laws to effectively increase the U.S. taxation of income with respect to foreign operations have been announced. Whether any such initiatives will win Congressional or executive approval and become law is presently unknown; however, if any such initiatives were to become law and apply to A. Schulman’s international operations, then there could be a material impact on its financial condition and results of operations.

 

Specific acts of terrorism may disrupt operations and cause increased costs and liabilities.

 

The threat of terrorist attacks or actual terrorist events in the United States or abroad could affect A. Schulman in unpredictable ways. Terrorist threats or events could create political or economic instability, affecting A. Schulman’s business in general. The increased costs related to heightened security could also have a negative impact on A. Schulman’s financial condition. A. Schulman insures its properties for acts of terrorism. Such threats or events could also result in operational disruption, including difficulty in obtaining raw materials, difficulty in delivering products to customers, or general delay and inefficiencies in A. Schulman’s supply chain. Additionally, A. Schulman’s manufacturing facilities, both within the United States and those located abroad, may become direct targets or indirect casualties of terrorist attacks, leading to severe damage including loss of life and loss of property.

 

Litigation from customers, employees or others could adversely affect A. Schulman’s financial condition.

 

From time to time, A. Schulman may be subject to claims or legal action from customers, employees and/or others. Whether these claims and legal actions are founded or unfounded, if these claims and legal actions are not resolved in A. Schulman’s favor, they may result in significant financial liability and/or adversely affect market perception of A. Schulman and its products. Any financial liability or reputation damage could have a material adverse effect on A. Schulman’s business, which, in turn, could have a material adverse effect on its financial condition and results of operations.

A. Schulman is dependent upon good relationships with its various suppliers, vendors and distributors.

 

A. Schulman relies upon good relationships with a number of different suppliers, vendors and distributors. If A. Schulman’s relationships with these parties were to deteriorate or if a number of these parties should elect to discontinue doing business with A. Schulman, its business operations could be adversely affected.

 

A. Schulman may be required to adopt International Financial Reporting Standards, or other accounting or financial reporting standards, the ultimate adoption of such standards could negatively impact its business, financial condition or results of operations.

 

Although not yet required, A. Schulman could be required to adopt International Financial Reporting Standards or other accounting or financial reporting standards different than accounting principles generally accepted in the United States of America for its accounting and reporting standards. The implementation and adoption of new standards could favorably or unfavorably impact A. Schulman’s business, financial condition or results of operations.

 

ICO’s indebtedness subjects its business to restrictive covenants and may limit its ability to borrow additional funds and efficiently operate the business.

 

ICO’s credit agreement, as amended, which is referred to as the credit agreement, with KeyBank National Association and Wells Fargo Bank, National Association contains financial covenants including a minimum tangible net worth, leverage ratio, fixed charge coverage ratio and a required level of profitability. In addition, the credit agreement contains a number of limitations on the ability of ICO and its restricted U.S. subsidiaries to: (i) incur additional indebtedness; (ii) pay dividends or redeem any common stock; (iii) incur liens or other encumbrances on assets; (iv) enter into transactions with affiliates; (v) merge with or into any other entity; or (vi) sell assets.

 

Additionally, any material adverse change of ICO could restrict its ability to borrow under the credit agreement and could also be deemed an event of default under the credit agreement. A material adverse change is defined as a change in ICO’s financial or other condition, business, affairs or prospects or its properties and assets considered as an entirety that could reasonably be expected to have a material adverse effect, as defined in the credit agreement, on ICO.

 

In addition, any change of control of ICO or its restricted U.S. subsidiaries will constitute a default under the credit agreement. Change of control, as defined in the credit agreement, is summarized as follows: (i) the acquisition of, or, if earlier, the shareholder or director approval of the acquisition of, ownership or voting control, directly or indirectly, beneficially or of record, by any person, entity, or group (within the meaning of Rule 13d-3 of the Securities Exchange Act of 1934, as then in effect), of shares representing more than 50% of the aggregate ordinary voting power represented by the issued and outstanding common stock of ICO; (ii) the occupation of a majority of the seats (other than vacant seats) on the board of directors of ICO by individuals who were neither (A) nominated by ICO’s board of directors nor (B) appointed by directors so nominated; (iii) the occurrence of a change in control, or other similar provision, under or with respect to any material indebtedness agreement (as defined in the credit agreement); or (iv) the failure of ICO to own directly or indirectly, all of the outstanding equity interests of ICO’s Bayshore Industrial L.P. and ICO Polymers North America, Inc. subsidiaries.

 

In addition to the change of control clause under the credit agreement, certain of ICO’s foreign loan agreements and credit facilities also have change of control provisions. However, unlike the credit agreement, such change of control provisions are only triggered upon consummation of a transaction that constitutes a change of control. As of September 30, 2009, ICO had approximately $11.4 million of borrowings outstanding and $9.6 million of available borrowings under these agreements.

 

Although the credit agreement and the foreign loan agreements and credit facilities would all be paid in full and terminated at the closing of the merger, they would remain in place and ICO would remain subject to their various restrictions, covenants and limitations, if the merger does not occur.

Changes in the cost and availability of polymers could adversely affect ICO.

 

Polymers (i.e., resins) are a key ingredient of ICO’s products, and changes in the cost and availability of resins (generally produced by the major chemical companies) are outside of ICO’s control. If resin costs increase, whether because of higher oil and gas prices or because of lower supplies, ICO may be forced to increase the prices at which it sells its products to its customers. An increase in ICO’s prices may result in lower customer demand for its products, thereby adversely affecting its business. Additionally, higher resin prices will lead to higher working capital requirements that could result in higher debt and associated interest expense. On the other hand, a perception that resin costs will be declining in the near future may, in the short term, result in a decrease in customer demand for ICO’s products as customers wait for lower resin prices to be reflected in the price of ICO’s products, which could also have a material adverse effect on ICO’s financial condition, results of operations or cash flows.

 

Changes in economic activity could adversely affect ICO.

 

ICO’s business cycles are affected by changes in the level of economic activity in the various regions in which it operates. ICO’s business cycles are generally volatile and relatively unpredictable. In addition, ICO is affected by cycles in the petroleum and oil and gas industries. The length of these business cycles is outside of ICO’s control, and can adversely affect its financial condition, results of operations and cash flows.

 

The recent global economic crisis has caused, among other things, significant reductions in available capital and liquidity from banks and other providers of credit, substantial reductions and fluctuations in equity and currency values worldwide, and concerns that the worldwide economy may enter into a prolonged recessionary period, each of which may materially adversely affect ICO’s customers’ access to capital. A limit on ICO’s customers’ access to capital could inhibit their willingness or ability to purchase ICO’s products or affect their ability to pay for products that they have already purchased from ICO. In addition, downturns in ICO’s customers’ industries, even during periods of strong general economic conditions, could adversely affect ICO’s sales, profitability, financial condition, results of operations and cash flows.

 

ICO’s success is partly dependent upon its ability to develop superior proprietary technology, know-how and trade secrets.

 

ICO’s business operations are dependent to a certain degree upon proprietary technology, know-how and trade secrets developed by ICO. In many cases, ICO’s technology and know-how, or equivalent processes or technology are available to or practiced by its competitors, customers and others. In addition, there can be no assurance that third parties will not develop substantially equivalent or superior proprietary processes and technologies, or that ICO’s trade secrets will not lose their proprietary status. The development or acquisition by others of equivalent or superior information, processes or technologies or ICO’s failure to maintain the trade secret status of its proprietary technology know-how and trade secrets could have a material adverse effect on ICO’s financial condition, results of operations or cash flows.

 

The failure to properly manage inventories could expose ICO to material financial losses.

 

ICO’s product sales business, including its concentrate manufacturing operations, requires ICO to buy inventories of supplies and products and to manage the risk of ownership of commodity inventories having fluctuating market values. The maintenance of excessive inventories in ICO’s businesses could expose it to losses from drops in market prices for its products, while maintenance of insufficient inventories may result in lost sales to ICO.

 

There are risks associated with ICO’s presence in international markets, including political or economic instability and currency restrictions.

 

Approximately 68% of ICO’s fiscal year 2009 revenues were derived from operations outside the United States. ICO’s foreign operations include significant operations in its European, Asia Pacific and Brazilian business segments. ICO anticipates continuing to seek expansion of its international operations. ICO’s international operations are subject to certain political, economic and other uncertainties normally associated with international operations, including among others, risks of government policies regarding

private property, taxation policies, foreign exchange restrictions and currency fluctuations and other restrictions arising out of foreign governmental sovereignty over areas in which ICO conducts business that may limit or disrupt markets, restrict the movement of funds, result in the deprivation of contract rights, civil disturbance or other forms of conflict.

 

ICO’s international operations are subject to political and economic risks of developing countries and special risks associated with doing business in corrupt environments.

 

The majority of ICO’s international business is currently in regions such as Western Europe, where the risk level and extent of established legal systems is similar to that in the United States. ICO also conducts business in developing countries, and is focusing on increasing its sales and establishing new production facilities in regions such as South America, Southeast Asia, India and the Middle East, which have less developed legal systems, financial markets, and business and political environments than the United States, and therefore present greater political, economic and operational risks. ICO emphasizes legal compliance and has implemented policies, procedures and certain ongoing training of employees with regard to business ethics and many key legal requirements, such as the FCPA, which makes it illegal for ICO to give anything of value to foreign officials in order to obtain or retain any business or other advantages; however, there can be no assurance that ICO’s employees will adhere to its code of business ethics, other ICO policies, the FCPA or other legal requirements. If ICO fails to enforce its policies and procedures properly or maintain adequate record-keeping and internal accounting practices to accurately record its transactions, it may be subject to regulatory sanctions. In the event that ICO believes or has reason to believe that employees have or may have violated the FCPA or other laws or regulations, ICO will be required to investigate or have outside counsel investigate the relevant facts and circumstances, and if violations are found or suspected could face civil and criminal penalties, and significant costs for investigations, litigation, fees, settlements and judgments, which in turn could negatively affect ICO’s results of operations or cash flow.

 

The results of ICO’s operations are subject to market risk from changes in foreign currency exchange rates.

 

ICO earns revenues, pays expenses and incurs liabilities in countries using currencies other than the U.S. dollar, including the euro, the U.K. pound, the New Zealand dollar, Brazilian real, the Malaysian ringgit and the Australian dollar. Approximately 68% of ICO’s fiscal year 2009 revenues were derived from sales outside the United States. Because ICO’s consolidated financial statements are presented in U.S. Dollars, ICO must translate revenues, income and expenses into U.S. Dollars at exchange rates in effect during or at the end of each reporting period. Thus, increases or decreases in the value of the U.S. Dollar against other currencies in which ICO’s operations are conducted will affect its revenues and operating income. Because of the geographic diversity of ICO’s operations, weaknesses in some currencies might be offset by strengths in others over time. Fluctuations in foreign currency exchange rates affect ICO’s financial results, and there can be no assurance that fluctuation in foreign currency exchange rates will not have a material adverse effect on ICO’s financial condition, results of operations or cash flows.

 

Due to ICO’s lack of asset diversification, adverse developments in its industry could materially adversely impact its operations.

 

ICO relies primarily on the revenues generated in the polymer processing industry. Due to ICO’s lack of asset diversification, a significant adverse development in this industry could trigger or result in impairment charges and would likely have a significantly greater impact on its financial condition, results of operations or cash flows than if it maintained more diverse assets.

 

ICO’s success depends on attracting and maintaining key personnel; the failure to do so could disrupt ICO’s business operations.

 

ICO’s success depends upon its ability to attract and retain experienced and knowledgeable management and other professional staff. ICO’s results of operations depend to a large extent on the efforts, technical expertise and continued employment of key personnel and members of its management team. If ICO is unable to attract and retain

experienced and knowledgeable personnel or a significant number of its existing key personnel resign or become unable to continue in their present role without adequate replacements, ICO’s business operations could be adversely affected.

 

An impairment of goodwill could reduce ICO’s earnings.

 

In fiscal year 2009, ICO recognized a goodwill impairment of $3.5 million in its Asia Pacific reporting unit. The goodwill remaining on ICO’s balance sheet at September 30, 2009 is $4.5 million, which is entirely recorded in its Bayshore Industrial reporting unit. If ICO’s remaining goodwill becomes impaired, ICO may be required to record a significant charge to its earnings. Under generally accepted accounting principles, goodwill is required to be tested for impairment at least annually. ICO may be required to record a significant charge to earnings in its financial statements during a period in which any impairment of its goodwill is determined. Refer to Note 4 — “Goodwill” contained in ICO’s Consolidated Financial Statements in the ICO Annual Report on Form 10-K for the fiscal year ended September 30, 2009, which is incorporated by reference in this proxy statement/prospectus. For more information, see the section titled “WHERE YOU CAN FIND MORE INFORMATION” beginning on page 124.

 

Changes in tax laws could have an adverse impact on ICO’s earnings.

 

ICO is subject to income taxes in the United States and numerous foreign jurisdictions. Changes to tax laws, rules and regulations, including changes in the interpretation or implementation of tax laws, rules and regulations by the Internal Revenue Service or other domestic or foreign governmental bodies, could affect ICO in substantial and unpredictable ways. Such changes could subject ICO to additional compliance costs and tax liabilities, which could have an adverse impact on its financial condition, results of operations or cash flows.

 

Operational risks, and resulting uninsured claims and litigation, could adversely affect ICO’s business.

 

ICO’s operations involve many operational and contractual risks, which, even through a combination of experience, knowledge and careful evaluation, may not be overcome. ICO’s operational risks include, without limitation, the risk of losses, injuries and damages, caused by equipment failures, work-related accidents, natural disasters such as fires, floods and hurricanes, unanticipated operational failures, unanticipated environmental pollution or contamination and defects or contamination in its products or services. The occurrence of such operational risks could result in plant shutdowns for extended time periods, serious personal injuries, significant property and environmental damage, uninsured financial losses and damages suffered by ICO, customer claims for breach of contract or warranty, governmental claims and other third party claims.

 

Except for warranties implied by law, ICO generally makes only limited warranties with regard to the products and services it provides, and attempts to contractually disclaim or limit its liability in the case of breach of warranty or other contractual obligation; however, ICO has exposure to claims for breach of express and implied warranties, and other breach of contract claims, in the event that products are not manufactured to specifications. ICO’s activities as a vendor of specialty or custom products may result in liability for defective or unfit products. In some jurisdictions, certain liability cannot be disclaimed or contractually limited for products that are defective or are found not to be fit for purpose.

 

If ICO is found to have liability for, or is even simply required to legally defend, claims for breach of warranty, breach of contract, negligence, defective products or damages to third parties resulting from the occurrence of operational risks, ICO’s financial exposure could be significant, and its reputation could be adversely affected. ICO has insurance coverage against many operational risks and potential liability to customers and third parties, including product liability and personal injury claims related to its products, to the extent insurance is available and reasonably affordable; however, no assurance can be given that the nature and amount of that insurance will be sufficient to fully indemnify ICO against costs, expenses and liabilities arising out of pending and future claims and litigation. ICO’s insurance has deductibles or self-insured retentions, and contains certain coverage exclusions. In most cases, ICO’s insurance does not cover some or all elements of damages based on allegations that it is liable under legal theories of breach of contract or warranty, fraud or deceptive trade practices. In some cases, ICO obtains agreements from customers acknowledging its disclaimer of warranties and limiting its liability. Nevertheless,

insurance and customer agreements do not provide complete protection against losses and risks, and ICO’s results of operations could be adversely affected by uninsured operational risks, contractual risks and customer and third party claims and litigation. For more information, see Item 3 — “Legal Proceedings” in the ICO Annual Report on Form 10-K for the fiscal year ended September 30, 2009, which is incorporated by reference in this proxy statement/prospectus. For more information, see the section titled “WHERE YOU CAN FIND MORE INFORMATION” beginning on page 124.

 

ICO could be adversely affected if it fails to comply with any of the numerous federal, state and local laws, regulations and policies that govern environmental protection, zoning and other matters applicable to its businesses.

 

ICO’s business is subject to numerous federal, state and local laws, regulations and policies governing environmental protection, zoning and other matters. These laws and regulations have changed frequently in the past and it is reasonable to expect additional changes in the future. If existing regulatory requirements change, ICO may be required to make significant unanticipated capital and operating expenditures. ICO cannot assure you that its operations will continue to comply with future laws and regulations. Governmental authorities may seek to impose fines and penalties on ICO or to revoke or deny the issuance or renewal of operating permits for failure to comply with applicable laws and regulations. Under these circumstances, ICO might be required to reduce or cease operations or conduct site remediation or other corrective action, which could adversely impact its business operations.

 

ICO’s businesses expose it to potential environmental liability.

 

ICO’s businesses expose it to the risk that harmful substances may escape into the environment, which could result in personal injury or loss of life, severe damage to or destruction of property, or environmental damage and suspension of operations. ICO’s current and past activities, as well as the activities of its former divisions and subsidiaries, could result in, but are not limited to, substantial environmental, regulatory and other liabilities. Such liabilities could include the costs of cleanup of contaminated sites and site closure obligations. These liabilities could also be imposed on the basis of theories including negligence, strict liability, breach of contract, or as a result of its contractual agreement or implied-in-law obligation to indemnify customers or others in the ordinary course of business.

 

ICO may not have adequate insurance coverage for potential liabilities, including, without limitation, environmental liabilities.

 

While ICO maintains liability insurance, this insurance is subject to coverage limits and policy exclusions. In addition, certain policies specifically exclude coverage for damages resulting from environmental contamination. ICO’s results of operations could be adversely affected by the following risks with respect to its insurance coverage: (1) ICO may not be able to continue to obtain insurance on commercially reasonable terms; (2) ICO may be faced with types of liabilities that will not be covered by insurance; (3) ICO’s insurance carriers may become insolvent and not be able to meet their obligations under the policies; and (4) the dollar amount of any liabilities may exceed its policy limits. Even a partially uninsured claim, if successful and of significant size, could have a material adverse effect on ICO’s financial condition, results of operations or cash flows.

 

Future environmental, personal injury and other claims relating to ICO’s former Oilfield Services business could adversely affect its financial condition, results of operations and/or cash flows.

 

In 2002, ICO completed the sale of substantially all of its oilfield services business to National Oilwell Varco, Inc., formerly Varco International, Inc., which is referred to as NOV. In 2003, ICO sold its remaining oilfield services business to Permian Enterprises, Ltd., which is referred to as Permian. NOV and Permian purchased the assets and business of ICO’s former oilfield services business, but acquired limited responsibility for liabilities of ICO’s former oilfield services business relating to events occurring prior to the respective closings of the referenced divestitures, which are collectively referred to as the closings. Among the pre-closing liabilities retained by ICO are potential environmental claims including, without limitation, “Superfund” claims relating to off-site disposal of hazardous materials prior to the closings, potential claims by employees, contractors, and others for occupational

injuries sustained by such individuals prior to the closings, as well as other types of claims. There are currently no Superfund claims or other environmental claims pending against ICO that are expected to have a material adverse effect on its business or results of operations, except as described under the heading “Environmental Remediation” in Item 3 — “Legal Proceedings” contained in ICO’s Consolidated Financial Statements in the ICO Annual Report on Form 10-K for the fiscal year ended September 30, 2009, which is incorporated by reference in this proxy statement/prospectus. For more information, see the section titled “WHERE YOU CAN FIND MORE INFORMATION” beginning on page 124. There are currently no silicosis or other occupational injury claims pending that are expected to have a material adverse effect on ICO’s business or results of operations. However, since the late 1990’s, ICO has settled claims of approximately 35 former employees of ICO’s former oilfield services business who allegedly sustained personal injuries or died as a result of occupational exposure to silica. In the past, ICO has been a party to and settled material environmental and occupational injury (silicosis) claims related to its former oilfield services business. There can be no assurance that in the future there will not be new environmental claims, occupational injury claims, or other claims, including claims resulting from activities or conditions involving ICO’s former oilfield services business and occurring prior to the sale of the oilfield services business, having a material adverse effect on ICO’s financial condition, results of operations and/or cash flows.

 

Competition in ICO’s industry is intense, and ICO is smaller and has more limited resources than some of its competitors and potential competitors.

 

The industry in which ICO operates is highly competitive. Some of ICO’s competitors or potential competitors have substantially greater financial or other resources than it has. Larger competitors may be able to absorb the burden of any changes in federal, state and local laws and regulations or rising costs of raw materials more easily than ICO can, which would adversely affect its competitive position. The inability of ICO to effectively compete in its markets would have a material adverse effect on its financial condition, results of operations or cash flows.

 

ICO may be required to adopt IFRS, or other accounting or financial reporting standards, the ultimate adoption of which could negatively impact its business, financial condition or results of operations.

 

Although not yet required, ICO could be required to adopt IFRS or other accounting or financial reporting standards different than accounting principles generally accepted in the United States of America currently applicable to its accounting and financial reporting. The implementation and adoption of new standards could favorably or unfavorably impact ICO’s business, financial condition, results of operations or cash flows.

 

Potential disruptions in the global capital and credit markets may adversely affect ICO, including by adversely affecting the availability and cost of short-term funds for its liquidity requirements and its ability to meet long-term commitments, which in turn could adversely affect its results of operations, cash flows and financial condition.

 

ICO relies on its current credit facilities to fund short-term liquidity needs if internal funds are not available from its operations. ICO also uses letters of credit issued under its revolving credit facilities to support its insurance policies and supplier purchases in certain business units. Disruptions in the capital and credit markets could adversely affect ICO’s ability to draw on its bank revolving credit facilities. ICO’s access to funds under its credit facilities is dependent on the ability of the banks that are parties to the facilities to meet their funding commitments. ICO’s banks may not be able to meet their funding commitments to ICO if such banks experience shortages of capital and liquidity or if they experience excessive volumes of borrowing requests from ICO and other borrowers within a short period of time.

 

Longer-term disruptions in the capital and credit markets as a result of uncertainty, changing or increased regulation, reduced alternatives or failures of significant financial institutions could adversely affect ICO’s access to liquidity needed in its businesses. Any disruption could require ICO to take measures to conserve cash until the markets stabilize or until alternative credit arrangements or other funding for business needs can be arranged. Such measures could include deferring capital expenditures, as well as reducing or eliminating future share repurchases, dividend payments or other discretionary uses of cash.

Many of ICO’s customers and suppliers also have exposure to risks that their businesses are adversely affected by the worldwide financial crisis and resulting potential disruptions in the capital and credit markets. In the event that any of ICO’s significant customers or suppliers, or a significant number of smaller customers and suppliers, are adversely affected by these risks, ICO may face disruptions in supply, significant reductions in demand for its products and services, inability of customers to pay invoices when due, and other adverse effects that could negatively affect ICO’s financial condition, results of operations or cash flows.

 

In addition to the risks relating to the merger (as provided in the section titled “— Risks Relating to the Merger” beginning on page 21) and the risks associated with the respective businesses of A. Schulman (as provided in the section titled “— Risks Associated with the A. Schulman Business” beginning on page 25) and ICO (as provided in the section titled “— Risks Associated with the ICO Business” beginning on page 32), the following risks should be considered because they may affect the combined company.

 

The failure to successfully combine the businesses of A. Schulman and ICO may adversely affect the combined company’s future results.

 

The success of the merger will depend, in part, on the ability of the combined company to realize anticipated benefits from combining the businesses of A. Schulman and ICO. To realize these anticipated benefits, the businesses of A. Schulman and ICO must be successfully combined. If the combined company is not able to achieve these objectives, the anticipated benefits of the merger may not be realized fully or at all or may take longer to realize than expected.

 

The combined company will be exposed to foreign exchange risk.

 

The results of operations of, and certain of the combined company’s intercompany balances associated with, the combined company’s international operations will be exposed to foreign exchange rate fluctuations. Upon translation, operating results may differ materially from expectations, and the combined company may record significant gains or losses on the remeasurement of intercompany balances.

 

The combined company may not be able to retain customers or suppliers or customers or suppliers may seek to modify contractual obligations with the combined company, which could have an adverse effect on the combined company’s business and operations.

 

As a result of the merger, the combined company may experience strain in relationships with customers and suppliers that may harm the combined company’s business and results of operations. Certain customers or suppliers may seek to terminate or modify contractual obligations following the merger whether or not contractual rights are triggered as a result of the merger. There can be no guarantee that customers and suppliers will remain with or continue to have a relationship with the combined company or remain with or continue to have a relationship with the combined company on the same or similar contractual terms following the merger. If any of the customers or suppliers seek to terminate or modify contractual obligations or discontinue the relationship with the combined company, then the combined company’s business and results of operations may be harmed. Furthermore, the combined company does not have long-term arrangements with many of its significant suppliers. If the combined company’s suppliers were to seek to terminate or modify the arrangement with the combined company, including as a result of bankruptcy of any such suppliers due to poor economic conditions, then the combined company may be unable to procure necessary supplies from other suppliers in a timely and efficient manner and on acceptable terms, or at all.

 

The combined company is expected to undergo internal restructurings and reorganizations that may cause disruption or could have an adverse effect on the combined company’s business and operations.

 

The combined company is expected to undergo certain internal restructurings and reorganizations in order to realize certain of the potential synergies of the merger. There can be no assurance that such internal restructurings and reorganizations will be successful or properly implemented. If any of such internal restructurings or

reorganizations are not successful or properly implemented, the combined company may fail to realize the potential synergies of the merger, which may harm the combined company’s business and results of operations or cause disruptions to the combined company’s operations, including disruption in the combined company’s supply chain.

 

The combined company will be responsible for ICO’s existing indebtedness upon completion of the merger, which may decrease the combined company’s business flexibility and will increase its borrowing costs.

 

Following the merger, the combined company will be responsible for ICO’s existing indebtedness. The combined company’s indebtedness and higher debt-to-equity ratio in comparison to that of A. Schulman on a recent historical basis may have the effect, among other things, of reducing the combined company’s flexibility to respond to changing business and economic conditions and will increase borrowing costs.

 

The combined company may be exposed to increased litigation, which could have an adverse effect on the combined company’s business and operations.

 

The combined company may be exposed to increased litigation from stockholders, customers, suppliers, consumers and other third parties due to the combination of A. Schulman’s business and ICO’s business following the merger. Such litigation may have an adverse impact on the combined company’s business and results of operations or may cause disruptions to the combined company’s operations.

 

A. Schulman and ICO have been named as defendants in two lawsuits involving the merger and the transactions contemplated by the merger agreement. A. Schulman and ICO have entered into an agreement in principle with the plaintiff to settle one of the lawsuits, subject to preparation and execution of a definitive settlement agreement and final court approval. The other lawsuit has been voluntarily nonsuited by the plaintiff. In addition, ICO has received two demand letters relating to the merger and the transactions contemplated by the merger agreement. The material facts surrounding these lawsuits and demand letters are discussed in the section titled “THE MERGER — Litigation Related to the Merger” beginning on page 78.

 

This proxy statement/prospectus is being mailed on or about March 29, 2010 to holders of record of ICO common stock as of the close of business on March 17, 2010 and constitutes notice of the special meeting in conformity with the requirements of the TBOC. It is accompanied by a proxy furnished in connection with the solicitation of proxies by the ICO board of directors for use at the special meeting and at any adjournments or postponements of the special meeting.

 

The special meeting is scheduled to be held on April 28, 2010 at 10.00 A.M., Central Time, at the Doubletree Guest Suites Houston located at 5353 Westheimer Road, Houston, Texas 77056.

 

The purposes of the special meeting are as follows:

 

 

The ICO board of directors has unanimously determined that the merger agreement and the transactions contemplated by the merger agreement are advisable and in the best interests of ICO and its shareholders. Consequently, the ICO board of directors has unanimously approved the merger agreement and the merger and unanimously recommends that you vote “FOR” approval of the merger agreement. In addition, the ICO board of directors unanimously recommends that you vote “FOR” the proposal regarding the possible adjournment of the special meeting.

 

Only holders of record of ICO common stock at the close of business on the record date, March 17, 2010 are entitled to notice of, and to vote at, the special meeting. At the close of business on March 17, 2010 there were 27,764,340 shares of ICO common stock outstanding held by approximately 436 holders of record. Each holder of record of ICO common stock on March 17, 2010 will be entitled to one vote for each share of ICO common stock held on all matters to be voted upon at the special meeting.

 

The presence, in person or by proxy, of the holders of a majority of the outstanding shares of ICO common stock entitled to vote at the special meeting is necessary to constitute a quorum. Abstentions and broker non-votes, which are executed proxies returned by a broker holding shares of ICO common stock in “street name” that indicate that the broker has not received voting instructions from the beneficial owner of the shares of ICO common stock and does not have discretionary authority to vote the shares of ICO common stock with respect to the approval of the

merger agreement, will be counted for purposes of determining whether a quorum exists. Approval of the merger agreement requires the affirmative vote of two-thirds of the shares of ICO common stock outstanding as of March 17, 2010 and entitled to vote.

 

If a quorum is not present at the special meeting, or if there are not sufficient votes at the time of the special meeting to approve the merger agreement, ICO’s shareholders will be asked to consider and vote upon a proposal to adjourn the special meeting to solicit additional proxies. Adjournment of the special meeting requires the affirmative vote of the holders of a majority of the shares of ICO common stock present, in person or by proxy, and entitled to vote at the special meeting.

 

All properly executed proxies delivered and not properly revoked will be voted at the special meeting as specified in such proxies. If you do not specify a choice, your shares of ICO common stock represented by a signed proxy will be voted “FOR” the proposal to approve the merger agreement and, if necessary, “FOR” the proposal to approve the adjournment of the special meeting. If you abstain from voting, it will have the same effect as a vote “AGAINST” the proposal to approve the merger agreement and as a vote “AGAINST” the proposal to approve the adjournment of the special meeting. The failure to submit a vote by proxy or in person at the special meeting, as well as broker non-votes, will have the same effect as a vote “AGAINST” the proposal to approve the merger agreement and will have no effect on the proposal to adjourn the special meeting.

 

ICO does not expect that any other matter will be brought before the special meeting. If, however, other matters are properly presented, the persons named as proxies will vote in accordance with their judgment with respect to those matters.

 

ICO shareholders may vote on matters that are properly presented at the special meeting in four ways:

 

 

For the special meeting, ICO is offering registered shareholders the opportunity to vote their shares of ICO common stock electronically through the Internet or by telephone. Instead of submitting the enclosed proxy by mail, ICO shareholders may vote by telephone or via the Internet by following the procedures described on the enclosed proxy. The telephone and Internet voting procedures are designed to authenticate ICO shareholders’ identities, to allow ICO shareholders to give their voting instructions and to confirm that ICO shareholders’ instructions have been recorded properly. The deadline for voting through the Internet or by telephone is 1:00 A.M., Central Time, on April 28, 2010. If you vote through the Internet, you may incur costs associated with electronic access, such as usage charges from Internet service providers and telephone companies.

 

Holders of shares of ICO common stock in “street name” should follow the voting instructions provided by the broker, bank or other organization that holds their shares of ICO common stock. For ICO shareholders planning to attend the special meeting and vote in person, ballots will be available. If an ICO shareholder’s shares are held in the name of their broker, bank or another ICO shareholder of record, such ICO shareholder must establish that they were the beneficial owner of the shares of ICO common stock on March 17, 2010.

 

The solicitation of proxies may include mail, telephone, facsimile and e-mail. The cost of the solicitation of proxies from holders of shares of ICO common stock and all related costs will be borne by A. Schulman. ICO (in consultation with A. Schulman) has retained a proxy solicitor, Georgeson, Inc., to assist in the solicitation of proxies for the special meeting at an estimated cost to A. Schulman of $7,500, plus reimbursement of reasonable expenses. In addition, brokerage firms and other persons representing beneficial owners of shares of ICO common stock may be reimbursed for their expenses in forwarding solicitation materials to the beneficial owners. Original solicitation

of proxies by mail may be supplemented by mail, telephone, facsimile, e-mail or personal solicitation by directors, officers or other regular employees of ICO. No additional compensation will be paid to directors, officers or other regular employees of ICO for these services. If you have any questions or need assistance in filling out or submitting your proxy, please contact Georgeson, Inc. at the following address and telephone number: Georgeson, Inc., 199 Water Street, 26th Floor, New York, New York 10038-3560; 1-800-868-1381.

 

Proxies may be revoked at any time before a vote is taken or the authority granted is otherwise exercised. Revocation may be accomplished by the execution of a later dated proxy, or a later cast Internet or telephone vote, with regard to the same shares of ICO common stock, or by giving notice in writing to the Corporate Secretary at ICO, Inc., 1811 Bering Drive, Suite 200, Houston, Texas 77057, or in person at the special meeting. Any ICO shareholder who attends the special meeting and revokes his, her or its proxy may vote in person. However, attendance by an ICO shareholder at the special meeting alone will not have the effect of revoking an ICO shareholder’s validly executed proxy. If you hold shares of ICO common stock through a broker, bank or other nominee, you may submit new voting instructions by contacting such broker, bank or other nominee.

 

This section of the proxy statement/prospectus describes material aspects of the proposed merger. While we believe that the description covers the material terms of the merger, this summary does not contain all the information that is important to you. You should therefore carefully read this entire proxy statement/prospectus and the other documents we refer to, including the merger agreement attached as Annex A and incorporated by reference in this proxy statement/prospectus, for a more complete understanding of the merger agreement and the merger.

 

The merger agreement provides for the merger of ICO with and into Wildcat, with Wildcat surviving the merger. As a result of the merger, ICO will become wholly-owned by A. Schulman.

 

A. Schulman

 

Founded in 1928 by Alex Schulman, the Akron, Ohio based A. Schulman began as a processor of rubber compounds. During those early days, when Akron, Ohio was known as the rubber capital of the world, Mr. Schulman saw opportunity in taking existing rubber products and compounding new formulations to meet under-served market needs. As the newly emerging science of polymers began to make market strides in the early 1950s, A. Schulman was there to advance the possibilities of the technology, leveraging its compounding expertise into developing solutions to meet exact customer application requirements. A. Schulman later expanded into Europe and Latin America, establishing manufacturing plants, technology centers and sales offices in numerous countries. A. Schulman changed its state of incorporation to Delaware in 1969, and went public in 1972. Today, A. Schulman is recognized as one of the leading global plastics compounders. A. Schulman’s principal executive offices are located at 3550 West Market Street, Akron, Ohio, 44333 and its telephone number is (330) 666-3751.

 

A. Schulman’s business is organized into five business segments: (1) Europe; (2) North America Masterbatch; (3) North America Engineered Plastics; (4) North America Distribution Services and (5) Asia.

 

 

 

ICO

 

Incorporated in 1978 under the laws of the State of Texas, ICO manufactures specialty resins and concentrates and provides specialized polymer processing services. ICO also provides toll processing services including ambient grinding, jet milling, compounding and ancillary services for resins produced in pellet form as well as other material. ICO’s manufacturing capabilities include size reduction, compounding and related services. These services are an intermediate step between the production of polymer resins and the manufacture of a wide variety of products such as toys, water tanks, paint, garbage bags, plastic film and other polymer products. ICO’s products and services are provided through 20 operating facilities located in nine countries in the Americas, Europe and Asia Pacific. ICO’s customers include major chemical companies, polymer production affiliates of major oil exploration and production companies, and manufacturers of plastic products. ICO’s principal executive offices are located at 1811 Bering Drive, Suite 200, Houston, Texas, 77057, and its telephone number is (713) 351-4100.

 

In November 2007, ICO and A. Schulman entered into a Confidentiality and Non-Disclosure Agreement pursuant to which each party agreed to treat confidentially certain proprietary information shared by each party to enable A. Schulman to evaluate the suitability of purchasing certain grinding and related services from ICO. In September 2008 A. Schulman executed its standard supply agreement with ICO, pursuant to which it agreed to purchase from ICO certain compounding, grinding, storage and packaging services. In addition, A. Schulman has acquired from ICO certain similar services in Europe from time to time, particularly in Holland, although not pursuant to a written supply agreement. The parties believe that these arrangements have been entered into in the ordinary course of business under standard terms and conditions, and that they are not material in the aggregate to their respective business enterprises.

 

As part of the continuous evaluation of their respective businesses, each of ICO’s and A. Schulman’s board of directors and management have regularly evaluated their respective company’s business strategy and prospects for growth and considered opportunities to improve their respective operations and financial performance in order to create value for their respective shareholders. As part of this process, each of ICO’s and A. Schulman’s respective management has evaluated various opportunities with ICO’s and A. Schulman’s respective boards of directors. As part of these evaluations, each of ICO’s and A. Schulman’s respective boards of directors and management on various occasions have received advice from outside industry, financial and legal advisors.

 

From time to time, A. John Knapp, Jr., ICO’s Chief Executive Officer, has engaged in preliminary discussions with other industry participants and private equity firms regarding the possibility of various business combination transactions. Since January 1, 2008, Mr. Knapp engaged in preliminary discussions with various third parties, consisting primarily of private equity firms as well as Company C described below, regarding strategic transactions. In late January, 2008, at Mr. Knapp’s request, Mr. Knapp, accompanied by Gregory T. Barmore, Chairman of the Board of ICO, met with Howard R. Curd, Chairman of a special committee of the A. Schulman board of directors (hereinafter referred to as the Special Committee), and primarily discussed general industry matters and briefly discussed a possible business combination transaction between the companies. The Special Committee had been established on November 15, 2007 as part of an agreement between A. Schulman and a group of investors led by Barington Capital Group, L.P. for the purpose of exploring options to increase A. Schulman stockholder value. Pursuant to that agreement, the initial members of the Special Committee were Howard R. Curd, Michael A. McManus, Willard R. Holland, James A. Mitarotonda, and John B. Yasinsky. These independent directors were selected primarily based on their experiences and expertise in strategic transactions. Because the January 2008 meeting largely consisted of the participants becoming acquainted with each other and the brief business combination discussions that occurred were general and casual, none of the participants determined at that time to pursue a possible transaction between the companies.

By late 2008, the ICO board of directors had initiated a process of searching for a new chief executive officer. During this period when the search for a new chief executive officer was pending, the ICO board of directors determined that Mr. Knapp’s primary role and focus should be to manage ICO’s operations and to prepare for the eventual transition to a new chief executive officer. Given the depressed level of ICO’s stock price and the pending chief executive officer search, the ICO board of directors determined that any discussions regarding any potential merger or sale involving ICO should be conducted through Mr. Barmore; therefore in February 2009 the ICO board of directors determined that Mr. Knapp should cease discussions regarding any potential merger or sale involving ICO.

 

In early March 2009, Mr. Knapp and Joseph M. Gingo, Chairman of the A. Schulman board of directors and President and Chief Executive Officer of A. Schulman, communicated on a number of industry-related topics, which did not include a discussion of a potential business combination. On March 24, 2009, Messrs. Knapp and Gingo met, and during the course of the meeting Mr. Gingo expressed an interest in A. Schulman’s acquiring ICO. Mr. Knapp indicated that he could not speak on behalf of ICO’s board of directors but, as a shareholder, he would be interested in considering a reasonable proposal to combine the companies. Mr. Knapp suggested that the proper manner for Mr. Gingo to indicate A. Schulman’s interest in ICO would be for him to send a letter to ICO’s board of directors. Mr. Gingo responded that the A. Schulman board of directors had a meeting scheduled for April 2, 2009 at which Mr. Gingo intended to propose sending ICO an indication of A. Schulman’s interest in pursuing a transaction with ICO.

 

On April 2, 2009, the A. Schulman board of directors met. Members of A. Schulman’s management and a representative of Jones Day, A. Schulman’s legal counsel, also participated in the meeting. During this meeting, the A. Schulman board of directors continued to consider certain potential strategic transactions, including possible add-on acquisitions and business combinations, with a number of targets that A. Schulman believed to be attractive. Representatives of A. Schulman’s industry advisor, Charles River Associates, attended the board meeting and participated in discussions with the board regarding a number of potential acquisition candidates. As part of these discussions, A. Schulman’s board of directors identified ICO as a potential acquisition opportunity. With respect to the other potential acquisition transactions that were discussed, A. Schulman’s board of directors believed that certain of the parties to these potential transactions would not be interested in a current sale transaction and, with respect to the parties that might be willing to consider a potential sale transaction, A. Schulman’s board of directors believed that the consideration that would be required to be paid by these parties would be too high relative to then-current market multiples. A. Schulman’s board of directors concluded that a potential transaction with ICO would be a better strategic fit than any of these other potential transactions, particularly in respect of enhancing A. Schulman’s product portfolio in certain rotomolding compounds, and decided to pursue a potential transaction with ICO at this time. For more information, see the section titled “THE MERGER — A. Schulman’s Reasons for the Merger” beginning on page 52.

 

During April and May of 2009, A. Schulman’s Special Committee, then consisting of Howard R. Curd, Michael A. McManus, Lee D. Meyer, James A. Mitarotonda, and John B. Yasinsky, met regularly and continued to discuss the possibility of acquiring ICO. Mr. Meyer, also an independent director, had been added to the Special Committee to replace Willard R. Holland, who retired from the A. Schulman board of directors at the end of his term expiring on December 18, 2008, based primarily on his experiences and expertise in strategic transactions. The material aspects of these meetings are described below.

 

On April 13, 2009, the Special Committee of the A. Schulman board of directors met to review the status of the proposal to acquire ICO. Members of A. Schulman’s management also participated in the meeting. The Special Committee authorized Mr. Curd, Chairman of the Special Committee, to send a non-binding letter to ICO regarding A. Schulman’s interest in potentially acquiring or merging with ICO. On the same date, Mr. Curd sent a non-binding letter to Mr. Knapp in which he requested the opportunity to discuss A. Schulman’s interest in pursuing a strategic combination of A. Schulman and ICO. In the letter, Mr. Curd proposed a transaction in which A. Schulman would deliver consideration, comprised of approximately one-third cash and two-thirds A. Schulman common stock, at an unspecified premium above ICO’s reported 2008 book value per share (which was approximately $3.94 per share of ICO common stock outstanding as of ICO’s 2008 fiscal year end on September 30, 2008). ICO’s common stock had a closing price on April 13, 2009 of $2.17 per share.

In April 2009, members of ICO’s board of directors began consulting with Baker Botts L.L.P., ICO’s outside counsel, about certain legal aspects relating to the board’s consideration of A. Schulman’s indication of interest.

 

On April 30, 2009, the chief executive officer of a privately held specialty chemicals company, referred to herein as Company A, with whom an ICO representative had had a prior discussion, delivered a letter to Mr. Barmore indicating an interest in evaluating a possible business combination transaction, without specifying any proposed terms of such a transaction. On May 5 and 6, 2009, the ICO board of directors held a meeting at which it discussed with representatives of Baker Botts and representatives of two investment banks the indications of interest ICO had received from A. Schulman and Company A. At this meeting, Baker Botts reviewed with the ICO board its fiduciary obligations relating to matters arising from its consideration of strategic alternatives. After reviewing the contents of the April 13, 2009 letter from A. Schulman and considering with its legal and financial advisors a number of factors, including both companies’ operational and financial positions and outlook as well as ICO’s then-current stock price (which had a closing price on May 5, 2009 of $3.08 per share), the ICO board concluded that the best route to maximize shareholder value at that time was to continue to pursue ICO’s plan as an independent company. The ICO board determined to advise A. Schulman that ICO was not for sale and that, after reviewing the transaction with its advisors, the ICO board had concluded that the proposed transaction was not in the best interest of ICO’s shareholders. Given its decision to remain independent, the ICO board also determined that it would not pursue a transaction with Company A. The ICO board decided to delay, for the time being, the preparation of a response to the unsolicited letter it had received from Company A to await further developments with A. Schulman.

 

By letter dated May 7, 2009, Mr. Barmore informed Mr. Curd of the ICO board’s decision.

 

On May 12, 2009, the Special Committee of the A. Schulman board of directors met and discussed Mr. Barmore’s letter dated May 7, 2009. Members of A. Schulman’s management also participated in the meeting. The Special Committee continued to believe that a transaction between A. Schulman and ICO was a very attractive strategic opportunity and concluded that a response outlining A. Schulman’s continued interest in a potential transaction between the two companies was warranted.

 

On May 12, 2009, Mr. Curd delivered a letter to Mr. Barmore, expressing disappointment with ICO’s response to A. Schulman’s April 13, 2009 letter and emphasizing the merits of A. Schulman’s proposal to combine the companies, including the premium to ICO’s then-current stock price and the fact that ICO’s shareholders would be able to participate in a combined company with a strong global presence in both the masterbatch and rotomolding product areas. In this letter, Mr. Curd expressed surprise that the ICO board had summarily dismissed A. Schulman’s proposal to combine with ICO without engaging in a serious dialogue or allowing A. Schulman to conduct a due diligence review of ICO. This letter again requested that the parties meet to discuss that proposal and requested that A. Schulman be permitted to commence a due diligence review of ICO, which it noted could increase the consideration that A. Schulman was willing to pay. This letter reserved the right, if ICO did not commence discussions with A. Schulman, to publicly release the terms of the A. Schulman proposal, including what it characterized as the ICO board’s unwillingness to engage in a dialogue with respect to the transaction. Mr. Barmore called Mr. Curd on May 15, 2009 to acknowledge receipt of the letter and to emphasize the ICO board’s position that ICO was not currently for sale. Mr. Barmore stated that he would, however, suggest that the ICO board reconsider the possibility of a business combination with A. Schulman, given Mr. Curd’s strong views as to the merits of a combination for ICO’s shareholders.

 

On May 20, 2009, Mr. Barmore and ICO directors Kumar Shah and David E. K. Frischkorn, Jr. held a brief telephone call with ICO General Counsel Charlotte Fischer Ewart and Baker Botts to discuss the May 12, 2009 letter from A. Schulman and the possibility of a combination of the two companies. On May 22, 2009, Messrs. Barmore and Knapp and Ms. Ewart met with Baker Botts again to discuss those topics. During these discussions, the participating directors determined that it would be in ICO’s best interest to further explore A. Schulman’s proposal.

 

On May 22, 2009, having not received a written response from ICO to Mr. Curd’s May 12 proposal, the Special Committee of the A. Schulman board of directors met and discussed various alternative approaches to acquiring ICO, including acquiring shares of ICO in the open market and/or engaging in a tender offer. Members of A. Schulman’s management and a representative of Jones Day also participated in the meeting. On consideration of these alternatives, the Special Committee determined to continue to pursue a potential transaction with ICO on mutually agreeable terms, as compared to a possibly hostile course of action. Mr. Barmore thereafter called

Mr. Curd and expressed that while ICO’s board had determined that ICO was not for sale, he would be willing to meet with Mr. Curd to better understand A. Schulman’s views as to the benefits of a combination.

 

On May 28, 2009, ICO received a letter from a company that owns and operates a group of companies in diversified industries, referred to herein as Company B, expressing an interest in an investment in or acquisition of ICO without specifying any proposed terms of such a transaction.

 

On May 29, 2009, the ICO board met with the company’s senior management and legal advisors to further consider A. Schulman’s May 12 letter. ICO’s management and directors further discussed and analyzed the possibility of a business combination with A. Schulman and discussed ICO management’s ongoing preparation of ICO financial projections. The ICO board decided to request that J.P. Morgan Securities, Inc., which is referred to as J.P. Morgan, provide advice to the board with respect to financial market conditions, takeover defenses and strategic planning. The ICO board determined that, subject to the receipt of such advice, the possibility of a combination between ICO and A. Schulman could have merit. The ICO board also determined that engaging in discussions with A. Schulman would be appropriate in light of A. Schulman’s overt threat of hostile activity, given the relatively depressed level of ICO’s stock price and the risks that such hostile activity would pose to ICO’s pending acquisitions and business initiatives. The ICO board authorized Mr. Barmore to engage in discussions regarding a possible combination and to send Mr. Curd a letter agreeing to a meeting so that the parties could explore A. Schulman’s proposed combination, subject to the parties’ execution of a suitable confidentiality agreement with “standstill” provisions that would generally restrict A. Schulman’s ability to pursue a transaction involving ICO without the ICO board’s approval. ICO’s common stock had a closing price on May 29, 2009 of $2.88 per share.

 

On June 1, 2009, the A. Schulman board of directors terminated the Special Committee of the A. Schulman board of directors and established the Strategic Committee of the A. Schulman board of directors as a regular committee. The Strategic Committee was comprised of the same members as the Special Committee.

 

At a meeting on June 2, 2009, the ICO board and management discussed the engagement of a financial advisor to advise the board with respect to its strategic planning, as well as the contents of a possible confidentiality agreement with A. Schulman. Representatives of J.P. Morgan provided a general overview of A. Schulman as well as their preliminary views as to the merits and considerations involved in a combination of the two companies along with a review of general matters regarding unsolicited offers and other merger and acquisition matters. The ICO board also discussed the letters received from each of Company A and Company B. The ICO board discussed sending both companies a letter indicating that ICO’s board had determined that ICO was not for sale. The ICO board recognized that if it later determined to solicit potential buyers for ICO, it would have the ability to contact Company A and Company B as part of that process and, given the lack of specificity of any terms in the indications or interests by both Company A and B and the fact that neither had posed the threat of hostile activity, the ICO board preliminarily determined not to engage in acquisition discussion with these two companies. The ICO board determined, however, that ICO management should first discuss this matter with J.P. Morgan before sending any letter to Company A or to Company B.

 

On June 9, 2009, Mr. Barmore met with Mr. Curd to discuss the two companies’ relative strengths and challenges. At this meeting, Mr. Barmore gave Mr. Curd a letter explaining that the ICO board had authorized Mr. Barmore to engage in discussions with A. Schulman to explore the possibility of a combination subject to execution of a confidentiality/standstill agreement. Mr. Barmore also delivered to Mr. Curd a proposed confidentiality/standstill agreement.

 

Between June 15, 2009 and June 30, 2009, representatives of A. Schulman and ICO negotiated the terms of the proposed confidentiality/standstill agreement.

 

On June 17, 2009, the Strategic Committee of the A. Schulman board of directors met to discuss the terms of the proposed confidentiality/standstill agreement.

 

On June 24, 2009, the Strategic Committee of the A. Schulman board of directors met to discuss the terms of the proposed confidentiality/standstill agreement.

 

On June 25, 2009, following discussions with its financial advisor, and based on the determination the ICO board of directors had made at its June 2, 2009 meeting ICO sent each of Company A and Company B a letter indicating that ICO’s board had determined that ICO was not for sale.

On June 25, 2009, the A. Schulman board of directors met and discussed the terms of a draft non-binding proposal letter to be sent to ICO regarding the possibility of acquiring ICO. Members of A. Schulman’s management also participated in the meeting.

 

Throughout the remainder of June 2009, ICO’s directors and senior management met periodically with ICO’s legal and financial advisors to discuss the possibility of a combination with A. Schulman and the proposed confidentiality/standstill agreement with A. Schulman. On June 30, 2009, ICO and A. Schulman entered into a confidentiality/standstill agreement pursuant to which they agreed, subject to certain exceptions, to keep information exchanged by the two parties confidential and to abide by “standstill” provisions for a six-month period, subject to customary specified exceptions.

 

On July 2, 2009, ICO formally engaged J.P. Morgan as its financial advisor in connection with its consideration of strategic alternatives.

 

In July 2009, a subset of the A. Schulman board of directors, referred to as the A. Schulman transaction committee, consisting of Mr. Curd, Mr. Meyer, and David G. Birney, held a series of meetings to discuss a potential transaction between A. Schulman and ICO. The A. Schulman transaction committee was later formally established by the A. Schulman board of directors on August 10, 2009, with the initial members being Mr. Curd, Mr. Meyer, and Mr. Birney.

 

On July 20, 2009, the Strategic Committee of the A. Schulman board of directors met to discuss due diligence in connection with the proposed transaction.

 

On July 23 and July 29, 2009, the A. Schulman transaction committee met to organize and prepare for meetings with ICO which were scheduled to occur the following week. Members of A. Schulman’s management and representatives of Charles River Associates also participated in the meetings.

 

On July 30 and July 31, 2009, representatives of the boards and management of ICO and A. Schulman, together with their respective financial advisors and consultants, met to discuss the possibility of a business combination. At this meeting, representatives of A. Schulman made a presentation regarding A. Schulman and the merits of a transaction between the two companies. The parties agreed to commence a preliminary due diligence investigation of each other with the goal of further analyzing a possible strategic combination.

 

On August 3, 2009, the A. Schulman transaction committee met to discuss the results of its July 30-31 meetings with ICO and its preliminary due diligence investigation of ICO. Members of A. Schulman’s management and a representative of Charles River Associates also participated in the meeting. The A. Schulman transaction committee authorized A. Schulman’s senior management to continue to pursue a potential transaction between A. Schulman and ICO.

 

At its meeting on August 6, 2009, the ICO board of directors discussed with ICO’s senior management and representatives of its legal and financial advisors the meetings that had taken place with A. Schulman’s representatives and financial advisors and consultants and the proposed plan for the parties to undertake a preliminary due diligence review of each other. Representatives of J.P. Morgan provided the ICO board with an overview of A. Schulman’s business and financial position and a preliminary overview of the potential financial impact of a combination of the two companies.

 

In August 2009, ICO engaged consultant Arthur D. Little, Inc., which is referred to as ADL, to provide due diligence and advisory services related to the possibility of a business combination with A. Schulman. In particular, ICO engaged ADL to review ICO’s business plan and financial forecasts, assist ICO in conducting its due diligence review of A. Schulman (including the outlook, prospects and risks associated with A. Schulman’s business and the possible combination of A. Schulman and ICO), assist ICO in preparing its responses to A. Schulman’s due diligence review of ICO and assist ICO in estimating the synergies that might be achieved through a combination of the two companies. Over the next several weeks, each party and its respective financial advisors and consultants reviewed the other party’s financial and business performance and outlook, and the parties continued to review the parameters of a possible combination. In that connection, ICO and A. Schulman exchanged financial projections and other business and financial information to aid each other in determining whether a preliminary agreement could be reached as to the financial terms of a business combination.

 

On September 2, 2009, Mr. Gingo and Mr. Knapp discussed the potential transaction between A. Schulman and ICO and the status of the due diligence process.

 

On September 3, 2009, representatives of ICO and A. Schulman, including the A. Schulman transaction committee, together with their respective financial advisors and consultants, met again to discuss the preliminary results of their respective due diligence reviews and their financial models and to discuss a timeframe for the parties to conduct additional due diligence necessary to fully develop their views as to the possible financial terms of a combination. The parties then exchanged follow-up questions and responses regarding business and financial matters.

 

On September 15, 2009, representatives of the boards and management of ICO and A. Schulman, together with their respective financial advisors and consultants, met again to discuss the parties’ respective financial information and the projections that had been exchanged.

 

On September 29, 2009, the A. Schulman transaction committee met to discuss the preliminary financial projections of ICO. Members of A. Schulman’s management and representatives of Charles River Associates and UBS, which A. Schulman had engaged to serve as its financial advisor, also participated in the meeting. At the conclusion of the meeting, the participants agreed that a potential transaction between A. Schulman and ICO should continue to be explored.

 

On September 30, 2009, the Strategic Committee of the A. Schulman board of directors met to discuss the potential transaction, to review the valuation of the potential transaction, and to consider the submission of a revised proposal for the acquisition of ICO. The Strategic Committee recommended that a revised proposal be submitted to the A. Schulman board of directors for consideration. Members of A. Schulman’s management and representatives of Jones Day, UBS, and Charles River Associates also participated in the meeting.

 

On October 1, 2009, the A. Schulman board of directors met to discuss the potential transaction between A. Schulman and ICO, to review the valuation of the potential transaction, and to review a recommended proposal by the Strategic Committee for the acquisition of ICO. Members of A. Schulman’s management and representatives of Jones Day, UBS and Charles River Associates also participated at the meeting. The members of the A. Schulman board of directors that participated in the meeting agreed that A. Schulman should proceed with communicating the revised proposal to ICO as recommended by the Strategic Committee of the A. Schulman board of directors.

 

On October 2, 2009, Mr. Curd delivered to Mr. Barmore a preliminary non-binding proposal pursuant to which A. Schulman would acquire ICO for 4.4 million shares of A. Schulman common stock and $89 million in cash. Based on A. Schulman’s closing stock price on October 1, 2009 of $19.23 per share, the proposal represented implied consideration of approximately $6.18 per fully diluted ICO common share, or a premium of approximately 44.3% to ICO’s closing stock price on October 1, 2009 of $4.28 per share. The proposal letter indicated that it was not subject to a financing contingency and proposed that ICO would agree to negotiate exclusively with A. Schulman for a period of 45 days. Mr. Barmore subsequently called Mr. Curd, and ICO’s financial advisor called A. Schulman’s financial advisor, to seek clarification as to certain aspects of the proposal letter. Mr. Barmore notified Mr. Curd that the ICO board intended to meet the following week to consider whether to pursue a transaction with A. Schulman. He expressed disappointment with the consideration contemplated by the proposal and asked Mr. Curd to determine, prior to the ICO board meeting date, whether A. Schulman intended to increase its offer. Mr. Curd responded that A. Schulman would determine by that date whether it intended to improve its offer to ICO. In the period following this meeting, ICO’s senior management and directors discussed with ICO’s financial and legal advisors the terms of A. Schulman’s proposal and whether there was any other potential combination opportunity that could provide more compelling terms for ICO’s shareholders.

 

On October 8, 2009, the ICO board of directors held a meeting with ICO’s senior management and representatives of its legal and financial advisors to discuss the results of the due diligence review of A. Schulman and the transaction terms set forth in A. Schulman’s proposal letter. Representatives of ADL reviewed ICO’s strategic alternatives, including the relative likelihood and possible reasons for a business combination with another party, and provided their observations as to the possible areas of strategic fit and synergies associated with a transaction with A. Schulman. Representatives of ADL also discussed the areas of risk and opportunity presented by A. Schulman’s business and financial projections. For more information regarding ADL’s presentation at the October 8, 2009 ICO board meeting, see the section titled “— Presentation by ICO’s Industry Consultant” beginning on page 59. Representatives of J.P. Morgan discussed their preliminary observations as to A. Schulman’s financial condition and projections and provided a preliminary analysis of A. Schulman’s proposal. Baker Botts then advised the board regarding its fiduciary duties. During this board meeting, Mr. Barmore received a telephone call from Mr. Curd in which Mr. Curd stated that A. Schulman had increased its offer to five million shares of A. Schulman common stock and $89 million in cash in exchange for the outstanding

common shares (including options) of ICO. Based on A. Schulman’s closing stock price on October 7, 2009 of $19.66 per share, the proposal represented implied consideration of approximately $6.66 per fully diluted ICO common share, or a premium of approximately 49.9% to ICO’s closing stock price on October 7, 2009 of $4.44 per share. The ICO directors, senior management and legal and financial advisors then discussed the terms of this new proposal and the mix of stock and cash consideration being proposed. After discussion and consultation with its financial and legal advisors, the ICO board authorized Mr. Barmore to contact Mr. Curd and request a further increase in A. Schulman’s proposed consideration.

 

On October 14, 2009, Messrs. Barmore and Curd met and Mr. Curd orally conveyed a proposal consisting of five million shares of A. Schulman common stock and $100 million in cash in exchange for the outstanding common shares (including options) of ICO. Based on A. Schulman’s closing stock price on October 13, 2009 of $19.70 per share, the proposal represented implied consideration of approximately $7.05 per fully diluted ICO common share, or a premium of approximately 53.9% to ICO’s closing stock price on October 13, 2009 of $4.58 per share. Mr. Barmore responded that he did not believe he would be able to support that offer to ICO’s board of directors, and Mr. Curd agreed to discuss a further revised offer with the A. Schulman board of directors.

 

On October 14 and October 15, 2009, at a meeting of the A. Schulman board of directors, members of A. Schulman’s senior management provided an update regarding the discussions between A. Schulman and ICO.

 

On October 20, 2009, Mr. Curd and Mr. Barmore held a meeting at which Mr. Curd increased A. Schulman’s offer to 5.1 million shares of A. Schulman common stock and $105 million in cash. Based on A. Schulman’s closing stock price on October 19, 2009 of $20.23 per share, the proposal represented implied consideration of approximately $7.38 per fully diluted ICO common share, or a premium of approximately 62.6% to ICO’s closing stock price on October 19, 2009 of $4.54 per share. The next day, after discussion with members of the A. Schulman board of directors, Mr. Curd delivered a letter to Mr. Barmore outlining these same general terms of the proposed transaction and requiring that, subject to certain exceptions, ICO not solicit other proposals, engage in any negotiations or enter into any agreement relating to a takeover proposal with another party for 45 days following the date of ICO’s execution of the proposal letter, during which time the parties would conduct further due diligence and negotiations to determine whether to proceed with a definitive agreement. The October 21, 2009 letter also proposed that ICO have representation on the board of directors of the combined company.

 

After discussions among ICO’s directors, senior management and legal and financial advisors over the following week regarding the terms of A. Schulman’s proposal, the ICO board met with senior management and its legal and financial advisors on October 28, 2009 to review the proposed transaction. Representatives of each of ADL and J.P. Morgan discussed ICO’s alternatives to pursuing a transaction with A. Schulman, including the identities of other potential transaction counterparties, their respective ability to consummate a transaction with ICO and the potential business and strategic fit between each of those parties and ICO. The directors also discussed the terms of the proposed 45-day exclusivity agreement, whether authorizing J.P. Morgan to solicit other proposals would be likely to result in an offer to acquire ICO on more favorable terms and the risk that such a solicitation would be likely to result in A. Schulman’s revocation of its proposal. The ICO board discussed the ability of ICO to negotiate with a new bidder under the exceptions to the exclusivity provisions as well as to exceptions that would be included in any merger agreement between the two parties. The ICO board also considered the risk that a search for another acquirer would cause a disruption in ICO’s customer and employee relationships. The ICO board also reviewed the communications that had taken place between ICO representatives and potential bidders in the past, and the fact that those discussions had not led any of those parties to provide a bona fide offer to acquire ICO. Baker Botts again reviewed with the ICO board its fiduciary duties. Based on the input provided by its financial advisors as to the potential acquirers’ likely level of interest in, and ability to pursue, a transaction with ICO, as well as the directors’ and senior management’s own observations about other potential business combination partners, the board expressed the belief that it was unlikely to obtain a more favorable offer from any other identified company. Further, after discussion and consultation with its legal and financial advisors, the ICO board determined that the relatively low chance of receiving the benefits of contacting other bidders did not justify the significant risk of pursuing such a strategy. Therefore, the ICO board decided not to contact any other potential bidders and determined to enter into an exclusivity agreement and engage in further due diligence review and negotiations to determine whether to proceed with a definitive transaction with A. Schulman. As a result of this determination, ICO did not contact Company A or Company B to discuss a potential bid for ICO.

On October 30, 2009, ICO and A. Schulman entered into a letter agreement pursuant to which ICO agreed not to engage in any negotiations or enter into any agreement relating to a takeover proposal with another party for 30 days, which time period could be extended by an additional 15 days at either party’s election. The letter agreement permitted ICO to engage in discussions and enter into a confidentiality agreement with a third party if the ICO board of directors were to determine, in good faith and after consultation with counsel and its financial advisor, that the third party’s takeover proposal was or could be reasonably expected to lead to a superior proposal, which was defined as an ICO takeover proposal that the ICO board determines in good faith after consultation with its financial advisor would result in a transaction that is more favorable to ICO’s shareholders than the transaction proposed by A. Schulman. The letter agreement also required ICO to notify A. Schulman regarding the existence of any third-party proposal, inquiry or negotiation.

 

Also on October 30, 2009, representatives of A. Schulman’s management and representatives of ICO’s management met to discuss the second phase of the due diligence investigation of each company. Following this meeting and throughout the month of November, each party conducted further business, financial, legal, environmental and other due diligence review of the other party.

 

On November 6, 2009, Jones Day, outside counsel to A. Schulman, provided a draft merger agreement to Baker Botts, and the parties and their respective legal advisors began negotiating the terms of the merger agreement.

 

On November 13, 2009, Mr. Knapp received a telephone call from the chief executive officer of another specialty chemicals company, referred to herein as Company C, inquiring whether ICO would be interested in exploring a combination of ICO and Company C. Mr. Knapp responded that, while his preliminary reaction was that he would not be interested in such a transaction as a shareholder of ICO, he would confer with others at ICO to determine whether there would be a reason to meet. Company C’s chief executive officer did not specify any terms upon which a combination would be proposed. Mr. Knapp notified A. Schulman of Company C’s inquiry, and ICO’s senior management began discussing Company C’s inquiry with ICO’s directors and legal and financial advisors.

 

On November 13, 2009, Baker Botts provided ICO’s comments on the initial draft of the merger agreement to A. Schulman and Jones Day. ICO’s comments on the initial draft of the merger agreement included a concept Mr. Knapp previously had raised with Mr. Gingo whereby ICO would have the ability to pay quarterly cash dividends with respect to the ICO common shares to the extent of ICO’s net income per share for the applicable prior fiscal quarter up to $0.05 per share per quarter.

 

From November 13 through November 30, 2009, A. Schulman and ICO and their respective advisors continued to negotiate the terms and conditions of the merger agreement. A. Schulman and ICO and their respective advisors engaged in a series of meetings by teleconference to negotiate the terms and conditions of the merger agreement, including the size of the break-up fee and the circumstances under which it is required to be paid, the no-shop provision and other related provisions, the termination provisions, the closing conditions, the ability of ICO to pay cash dividends to its shareholders following the execution of the merger agreement, a potential cash/stock election, the provisions relating to shareholder litigation, and various provisions relating to post-closing employee benefits.

 

On November 17, 2009, ICO’s board held a meeting with ICO’s legal and financial advisors to discuss Company C’s inquiry. Baker Botts reviewed the restrictions on discussions with third parties contained in the letter agreement with A. Schulman, as well as the exceptions to those restrictions. Representatives of J.P. Morgan provided a preliminary analysis of how acquiring ICO might impact Company C’s financial position and the corresponding level of consideration Company C might be capable of offering to ICO’s shareholders. The ICO board, following a discussion with J.P. Morgan representatives, noted that if Company C were to acquire ICO using the same amount and types of consideration that A. Schulman had proposed, the transaction would be slightly less accretive to Company C than to A. Schulman, and Company C would be significantly more leveraged after acquiring ICO than A. Schulman would be if it were to acquire ICO. ICO management also noted that a combination of ICO and Company C would likely offer fewer synergies than a business combination with A. Schulman. The ICO directors then discussed the relative merits and risks of proceeding with a discussion with Company C, including the risk associated with pursuing a transaction with Company C, which substantially lagged behind A. Schulman in its due diligence efforts and negotiations with ICO. Following these discussions, the ICO board concluded that Company C’s proposal was or could be reasonably expected to lead to a superior proposal, as defined in the letter

agreement dated October 30, 2009 between ICO and A. Schulman, and authorized certain ICO representatives to engage in substantive discussions and negotiations with Company C. Following the ICO board meeting, Mr. Knapp contacted the chief executive officer of Company C to arrange a telephonic meeting so that Company C could present further information regarding its interest in ICO.

 

On November 19, 2009, the A. Schulman board of directors met to discuss the status of the due diligence investigation of a potential transaction between A. Schulman and ICO. An overview of the due diligence results and the proposed transaction terms was provided to the A. Schulman board of directors by A. Schulman management and A. Schulman’s legal, financial and industry advisors.

 

On November 19, 2009, Company C and ICO discussed the terms of a potential confidentiality agreement. On November 20, 2009, representatives of ICO’s senior management and board received a presentation from Company C’s chief executive officer regarding Company C’s interest in a combination of the two companies. At that meeting, Mr. Barmore referred to an analyst report with a target price for ICO’s common stock of $8.00 per share and suggested that for Company C to cause ICO to become fully engaged in a discussion regarding a possible transaction, he would hope for value at or around $7.50 per ICO common share. The chief executive officer of Company C stated that while Company C believed it had a compelling case to support a transaction, the value that Company C contemplated for ICO’s common stock was significantly below that level. The chief executive officer of Company C then made a presentation regarding Company C’s strategy and prospects and the possible benefits of a combination with ICO. Mr. Barmore informed the chief executive officer of Company C that he expected the ICO board to meet on December 3, 2009 and that Company C should provide the terms of any proposal before that date.

 

On November 23, 2009, Company C’s chief executive officer sent a letter to ICO expressing confidence in Company C’s ability to construct a combination that would provide ICO shareholders a premium but noting that Company C would need access to nonpublic information before it could approach the valuation range of $7.50 to $8.00 per ICO share that had been discussed with Mr. Barmore.

 

During the course of negotiations on November 23, 2009, ICO and A. Schulman representatives discussed the possibility that the A. Schulman board of directors would be expanded to include two ICO directors following the closing of the merger.

 

On November 24, 2009, ICO and Company C entered into a confidentiality agreement relating to the exchange of nonpublic information. On November 27, 2009, J.P. Morgan provided Company C’s financial advisor with a copy of ICO’s financial projections and a draft merger agreement that had been prepared by Baker Botts for Company C’s review and comment. Also on that day, A. Schulman identified Mr. Barmore and ICO director Eugene Allspach as its selections for appointment to the A. Schulman board following the closing of the merger.

 

On November 27, 2009, the management of A. Schulman and ICO engaged in a meeting by teleconference to negotiate certain of the key open points in the merger agreement, including the size of the break-up fee and the circumstances under which it is required to be paid, the ability of ICO to pay cash dividends to its shareholders following the execution of the merger agreement, and various provisions relating to post-closing employee benefits.

 

On November 30, 2009, the chief executive officer of Company C called Messrs. Barmore and Knapp to inform them that Company C did not intend to make a proposal relating to a combination of ICO and Company C because it could not justify proceeding with a transaction at the price levels that had been discussed. Mr. Barmore subsequently informed Mr. Curd of A. Schulman of Company C’s decision.

 

On November 30, 2009, the A. Schulman board of directors met to discuss the substantially final terms and conditions of the draft merger agreement. Also in attendance were members of A. Schulman’s management and representatives of A. Schulman’s legal, financial and industry advisors. Representatives of Jones Day and A. Schulman’s management then reviewed with the A. Schulman board of directors the changes to the merger agreement, which had been provided to the directors prior to the meeting, and discussed the status of the negotiations with ICO. A. Schulman’s management updated the A. Schulman board of directors on the results of the due diligence investigation of ICO, the assessment of the risks and opportunities associated with the potential transaction, and the proposed structure of the potential transaction. A. Schulman’s financial and industry advisors each made presentations with respect to the proposed transaction. Jones Day reviewed with the board members their fiduciary duties in the context of the proposed transaction. At the conclusion of the November 30, 2009 meeting, the

A. Schulman board of directors unanimously adopted resolutions approving the merger agreement with ICO, the merger and the other transactions contemplated by the merger agreement, and authorizing A. Schulman to enter into the merger agreement.

 

Also on November 30, 2009, Mr. Curd delivered a letter to Mr. Barmore emphasizing A. Schulman’s strong interest in pursuing a combination of ICO and A. Schulman and informing Mr. Curd that A. Schulman’s board of directors had unanimously approved the proposed transaction at its meeting that morning. Mr. Curd’s letter expressed A. Schulman’s position that Company C’s discussions did not constitute a “superior proposal,” as defined in the letter agreement dated October 30, 2009 between ICO and A. Schulman, that there was no reason for delay in the execution of the merger agreement beyond December 2, 2009 and that if a merger agreement was not signed on that date, A. Schulman would withdraw its proposal to acquire ICO.

 

During the course of December 1 to December 2, 2009, representatives of A. Schulman and Jones Day, on the one hand, and ICO and Baker Botts, on the other hand, finalized the terms and conditions of the merger agreement.

 

On December 2, 2009, ICO’s board met to consider the proposed merger. J.P. Morgan, Baker Botts and ICO’s management reviewed the proposed transaction. The ICO board reviewed the termination of discussions with Company C, the merger agreement negotiations with A. Schulman and the results of the due diligence process, and also reviewed the strategic rationale and the anticipated benefits of the transaction to ICO’s shareholders. The ICO board discussed the view that pursuing other offers to acquire ICO would jeopardize the proposed transaction with A. Schulman. J.P. Morgan reviewed with the ICO board the financial terms of the proposed merger and presented certain financial analyses with respect to the merger as well as an analysis of ICO absent any transaction with A. Schulman. Baker Botts reviewed with the ICO board the terms of the proposed merger agreement and the fiduciary obligations of the board relating to the merger. J.P. Morgan rendered its oral opinion, subsequently confirmed in writing, to the ICO board that, as of that date, and based upon and subject to the factors, procedures, assumptions, qualifications and limitations set forth in its opinion, the consideration to be received by the holders of shares of ICO common stock in the proposed merger was fair, from a financial point of view, to such holders. The full text of J.P. Morgan’s written opinion dated December 2, 2009, which sets forth the assumptions made, procedures followed, matters considered, and qualifications and limitations on the opinion and the review undertaken in connection with rendering its opinion, is included as Annex B to this proxy statement/prospectus. ICO’s board unanimously determined that the merger agreement and the merger were advisable and in the best interest of ICO’s shareholders, approved the merger agreement and voted to recommend that the holders of ICO’s common stock approve the merger agreement.

 

Following the ICO board meeting, the merger agreement and related documents were finalized and that evening the parties signed the merger agreement. Later that evening, ICO issued a press release announcing the execution of the merger agreement and its fiscal year 2009 fourth quarter results and A. Schulman issued a press release announcing the execution of the merger agreement.

 

 

In reaching a conclusion to approve the merger and related transactions, the A. Schulman board of directors consulted with A. Schulman’s management, as well as legal and financial advisors and industry consultants. In these consultations, the board considered a number of factors, including, without limitation, the following:

 

 

 

 

The A. Schulman board of directors also considered the potential adverse impact of other factors weighing negatively against the merger, including, without limitation, the following:

 

 

 

 

THE A. SCHULMAN BOARD OF DIRECTORS HAS APPROVED THE MERGER AGREEMENT AND DETERMINED THAT THE TRANSACTIONS CONTEMPLATED BY THE MERGER AGREEMENT ARE ADVISABLE AND IN THE BEST INTERESTS OF A. SCHULMAN AND ITS STOCKHOLDERS.

ICO’s Reasons for the Merger

 

The ICO board of directors, at a special meeting held on December 2, 2009, unanimously:

 

 

In reaching its determination to recommend the approval of the merger agreement by its shareholders, the ICO board of directors consulted with management as well as J.P. Morgan, ICO’s financial advisor, ICO’s industry consultant and ICO’s legal counsel. ICO’s board of directors also considered various material factors that are discussed below. The discussion in this section is not intended to be an exhaustive list of the information and factors considered by ICO’s board of directors. In view of the wide variety of factors considered in connection with the merger, the ICO board of directors did not consider it practicable to, nor did it attempt to, quantify or otherwise assign relative weights to the specific material factors it considered in reaching its decision. In addition, individual members of the ICO board of directors may have given different weight to different factors. The ICO board of directors considered this information and these factors as a whole and, overall, considered the relevant information and factors to be favorable to, and in support of, its recommendation.

 

The ICO board of directors considered the following factors as generally supporting its decision to recommend that ICO’s common shareholders approve the adoption of the merger agreement:

 

 

 

 

 

 

 

 

In the course of its deliberations, the ICO board also considered a variety of risks and other potentially negative factors, including the following:

 

 

 

 

 

The ICO board of directors considered all of these factors as a whole and, on balance, concluded that it supported a favorable determination to enter into the merger agreement.

 

THE ICO BOARD OF DIRECTORS HAS APPROVED THE MERGER AGREEMENT AND UNANIMOUSLY RECOMMENDS THAT ICO’S SHAREHOLDERS VOTE FOR THE PROPOSAL TO APPROVE THE MERGER AGREEMENT.

 

During the course of the negotiations between A. Schulman and ICO, each of A. Schulman and ICO supplied the other with certain business and financial information that was not publicly available, including certain financial projections on a standalone basis. Each set of financial projections presented below have been prepared by, and are the responsibility of, management of A. Schulman and ICO, respectively. The ICO information was prepared on a basis consistent with the historical accounting policies included in the section titled “Management’s Discussion and Analysis of Financial Conditions and Results of Operations” contained in ICO’s Annual Report on Form 10-K for the year ended September 30, 2009, which is incorporated by reference in this proxy statement/prospectus. The A. Schulman information was prepared on a basis consistent with the historical accounting policies included in the section titled “Management’s Discussion and Analysis of Financial Conditions and Results of Operations” contained in A. Schulman’s Annual Report on Form 10-K for the year ended August 31, 2009, which is incorporated by reference in this proxy statement/prospectus. For more information, see the section titled “WHERE YOU CAN FIND MORE INFORMATION” beginning on page 124.

 

The financial projections are included in this proxy statement/prospectus only because this information was exchanged between A. Schulman and ICO and was provided to the respective financial advisors of A. Schulman and ICO in connection with the proposed merger. Such financial projections were neither prepared with a view to public disclosure, nor were such financial projections prepared in compliance with United States generally accepted

accounting principles or with published guidelines of the SEC or the American Institute of Certified Public Accountants regarding financial projections. We caution you that the financial projections are speculative in nature. Such financial projections are, in general, prepared solely for internal use and capital budgeting and other management decisions and are subjective in many respects.

 

While presented with numerical specificity, the financial projections are based upon a variety of estimates and assumptions relating to the businesses of A. Schulman and ICO. These estimates and assumptions may prove to be false for any number of reasons, including general economic conditions, competition, and the risks discussed in this proxy statement/prospectus under the section titled “RISK FACTORS” beginning on page 21. There can be no assurance that the projections will be realized, and actual results may differ materially from those shown. Generally, the further out the period to which financial projections relate, the more unreliable the projections become.

 

PricewaterhouseCoopers LLP has neither examined, complied nor performed any procedures with respect to the prospective financial information contained in this proxy statement/prospectus and, accordingly, PricewaterhouseCoopers LLP does not express an opinion or any other form of assurance on such information or its achievability.

 

The PricewaterhouseCoopers LLP reports incorporated by reference into this proxy statement/prospectus refer exclusively to the historical information of A. Schulman and ICO, respectively. PricewaterhouseCoopers LLP reports do not cover any other information in this proxy statement/prospectus and should not be read to do so.

 

Readers of this proxy statement/prospectus are cautioned not to place undue reliance on the specific portions of the financial projections set forth below. No one has made or makes any representation to any stockholder regarding the information included in these projections. The inclusion of financial projections in this proxy statement/prospectus should not be regarded as an indication that A. Schulman, ICO or their respective representatives considered or consider the projections to be a reliable prediction of future events, and the projections should not be relied upon as such. Management of A. Schulman and ICO have prepared from time to time in the past, and will continue to prepare in the future, internal financial forecasts that reflect various estimates and assumptions that change from time to time. Accordingly, the financial projections used in conjunction with the proposed merger may differ from these forecasts.

 

EXCEPT TO THE EXTENT REQUIRED BY LAW, NONE OF A. SCHULMAN, ICO OR THEIR RESPECTIVE DIRECTORS OR OFFICERS INTEND TO UPDATE OR REVISE THE FINANCIAL PROJECTIONS TO REFLECT CIRCUMSTANCES EXISTING AFTER THE DATE THEY WERE PREPARED OR TO REFLECT THE OCCURRENCE OF FUTURE EVENTS, EVEN IN THE EVENT THAT SOME OR ALL OF THE ASSUMPTIONS ARE SHOWN TO BE INACCURATE OR ERRONEOUS.

 

As referred to below, earnings before interest and taxes, which is referred to as EBIT, and earnings before interest, taxes, depreciation and amortization, which is referred to as EBITDA, are financial measures commonly used in the specialty chemicals industry but are not defined under GAAP. EBIT and EBITDA should not be considered in isolation or as a substitute for net income, operating income, cash flows from operating activities or any other measure of financial performance presented in accordance with GAAP or as a measure of a company’s profitability or liquidity. Because EBIT and EBITDA exclude some, but not all, items that affect net income, these measures may vary among companies, including ICO and A. Schulman. The EBIT and EBITDA data presented below may not be comparable to similarly titled measures of other companies. Management of ICO and A. Schulman believe that EBIT and EBITDA are meaningful measures to investors and provide additional information about their respective ability to meet future liquidity requirements for debt service, capital expenditures and working capital. In addition, management of ICO and A. Schulman believe that EBIT and EBITDA are useful comparative measures of operating performance and liquidity. For example, debt levels, credit ratings and, therefore, the impact of interest expense on earnings vary significantly between companies. Similarly, the tax positions of individual companies can vary because of their differing abilities to take advantage of tax benefits, with the result that their effective tax rates and tax expense can vary considerably. Finally, companies differ in the age and method of acquisition of productive assets, and thus the relative costs of those assets, as well as in the depreciation or depletion (straight-line, accelerated, units of production) method, which can result in considerable variability in depletion, depreciation and amortization expense between companies. Thus, for comparison purposes, management of ICO and A. Schulman believe that EBIT and EBITDA can be useful as objective and comparable measures of operating profitability and the contribution of operations to liquidity because they exclude these elements.

 

The following financial projections for A. Schulman on a standalone basis were provided by A. Schulman management to ICO:

 

A. Schulman, Inc.
Projected Financial Summary

 

 

 

 

The following financial projections for ICO on a standalone basis were provided by ICO to A. Schulman:

 

ICO, Inc.

 

Projected Financial Summary