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Acquisition caps PolyOne’s specialty business foray By ANGIE DeROSA Plastics News
Observers laud the vision of Avon Lake manufacturer’s CEO
PolyOne Corp.’s acquisition of ColorMatrix Group Inc. marries a major masterbatch house with a globally dominant player in liquid colorants, a formidable union as consumer products groups seek one-stop-shop suppliers for their packaging needs. The $486 million purchase, announced Oct. 3 by Avon Lakebased PolyOne, means that more than 50% of its operating income will be derived from specialty chemicals compared with 2% in 2005, PolyOne chairman, president and CEO Stephen
Newlin said. Experts are not unhappy with the purchase price, which represents a valuation of 11 times earnings before interest, taxes, depreciation and amortization (EBITDA). Two sources agreed that it’s not about Newlin the purchase price, but rather the return on investment. ColorMatrix is expected to provide about 15% return on investment annually. “This is a great move and I do not
have any problems at all with price they paid,” said Bill Ridenour, owner of Polymer Transaction Advisors Inc. in Newbury, Ohio. “Even if it grows modestly, it will grow out of that purchase price. Even at 10% growth in earnings per year, it will be a wonderful acquisition for them. This is a deal that they should be making. It could have made sense for any of the major masterbatch houses.” PolyOne officials declined further comment until its Oct. 26 conference call when it will announce third quarter operating results. The deal caps off an aggressive strategy to beef up PolyOne’s specialty business. The force behind the strategy is Mr. Newlin, who has been PolyOne’s top executive since 2006. Prior to that, he served as president of the industrial sector of Ecolab Inc. His career also included executive positions with Nalco Chemical Co., during which time he served as president of both Nalco Europe and Nalco Pacific. He has a reputation as a very
position in injection molding and pipe extrusion. Through the 1990s, it grew its European business. ColorMatrix set up a joint venture in the United Kingdom to establish that European base. By the time it was acquired by Audax Group in 2006, it had footholds in Hong Kong and Brazil. Audax acquired ColorMatrix at a valuation of 9.6 times EBITDA. After Audax purchased it, ColorMatrix acquired DosiColor in Latin America, and fluoropolymer firm Colorant Chromatics Group, which added to its growth in Europe. In 2009, it opened its commercial facility in Moscow. In terms of technology, ColorMatrix is at the forefront, sources said. Now it has in its portfolio HyGuard Oxygen Scavenging System, an oxygen scavenger additive. ColorMatrix boasts it as game-changing, engineered to enable fully recyclable, fully protective PET packaging for oxygen sensitive beverages and food. It offers that product to the likes of beer makers Baltika and Heineken, along with soft drink companies such as PepsiCo and Coca-Cola Co. ■
good operator, one source said. Mr. Newlin has been “ruthless in pursuit of that strategy but he’s been successful,” Mr. Ridenour said. “The fact that the stock price dropped 25% didn’t stop Newlin at all. I give him a lot of credit.” Dmitry Silversteyn of Longbow Research LLC in Independence, said that Mr. Newlin deserves the benefit of the doubt. “PolyOne hasn’t done anything in last few years to make me feel they are irresponsible,” Mr. Silversteyn said. “Goals that he put out in 2007 looked so out of reach and so fantastic, I don’t think people took him seriously.” PolyOne has already reached those goals. “Clearly, he’s a detailed and strategic thinker,” Mr. Silversteyn said. ColorMatrix is dominating the world in liquid colorants, Mr. Ridenour said, and has unparalleled technical prowess and great depth of technology and technical staff. ColorMatrix began in Cleveland in 1978, building its expertise in liquid colorant dispersion, according to its website. It established its
Angie DeRosa is a correspondent with Plastics News, a sister publication of Crain’s Cleveland Business.
FILE PHOTO/RUGGERO FATICA
Tyler Village, located in the St. Clair-Superior neighborhood, is composed of more than a dozen industrial-age buildings.
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Developer plans $9M Tyler Village investment
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By JAY MILLER jmiller@crain.com
The developer of Tyler Village in the St. Clair-Superior neighborhood on the eastern edge of downtown is hoping to nearly double the usable office space at the old industrial complex. Greystone Commercial Real Estate’s Anthony Asher told a Cleveland City Council committee last Tuesday, Oct. 11, that he plans a $9 million redevelopment of one of the more than a dozen industrial-age buildings that sprawl over more than a city block at East 36th Street and Euclid Avenue. The developer hopes to populate the building, called Building 42, with young, growing businesses looking for unique office space. Building 42 is a six-story brick building with 158,280 square feet. The complex is home to about 25 businesses, including Opera Cleveland, John Deere, a charter school, an audio studio and marketing firm DigiKnow. They occupy about 170,000 square feet in several buildings and employ nearly 300 people. While some space remains in those buildings, Mr. Asher said after the meeting that it’s time to prepare another building for future growth — a rare example of speculative real estate development in the weak economy. “We’ve got a lot of prospects (for the remaining space in the existing buildings) and a lot of them will roll
over into this new space,” he said. It doesn’t hurt that starting now will allow the city of Cleveland to apply for a 2011 $4 million state Job Ready Sites grant to help finance the complex. The city also plans to make available $700,000 in low-cost loans, $180,000 of which can be forgiven if certain goals are met. The plan is to gut the building, replace windows and create modern office space over the next 18 to 24 months. The goal is to have a building that meets the highest green building standards, a requirement for the state Job Ready Sites grant. Tyler Village once was the home of the W.S. Tyler Co., which made elevator cabs. It built a 24-building, 1 million-square-foot industrial complex on the 10-acre site before succumbing to changes in the industry after World War II. Greystone took on the complex in 2005 and steadily has demolished obsolete buildings for parking and strategically refurbished and marketed the better buildings. Council committees will continue to review the financial package over the next few weeks but the project likely will be approved since it has overwhelming council support. City of Cleveland economic development director Tracey Nichols told council that a market for this kind of space exists in the city. “We have a lot of companies interested in this type of space,” she said. “We’re excited to have more product on line.” ■
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