US chemical company A Schulman Inc today launched a $563 million unsolicited cash and stock bid for rival Ferro Corp.

Under the proposed deal, Ohio-based Schulman has offered to pay $6.50 per Ferro share, including $3.25 in cash and $3.25 worth of A Schulman common stock.

The takeover offer represents a 25 per cent premium over the closing price of Ferro common stock on 1 March and a 32 per cent premium over its volume-weighted average trading price over the preceding 60-day period.

A Schulman made the offer for Ferro in a letter on 13 February 2013, which Ferro's Board rejected and expressed their belief that the company should remain independent. 

A Schulman had first contacted Ferro in November 2012.

"A Schulman and Ferro are both recognised leaders in specialty chemicals with value-added product lines, similar business models, complementary competencies, markets and applications," said Joseph M Gingo, chairman, president and chief executive of A Schulman. 

"We believe our combination will deliver superior value to our respective shareholders and offer better value to customers, and we would welcome the opportunity to engage in a mutually beneficial dialogue with Ferro's Board and management."

Akron, Ohio-based A Schulman said its offer was based on publicly available information about Ferro that showed sales of about $1.2 billion reported for the first nine months of fiscal 2012. However, the company said the offer could be adjusted subject to customary due diligence.

A Schulman said that over the past five years, it has generated more than $400 million in free cash flow and by comparison, Ferro has generated approximately $60 million during that same period.

''Since adopting a strategy in 2008 to move to higher-margin businesses and exit low-margin businesses, A Schulman has successfully executed consolidations, restructurings and acquisition synergies that have been beneficial to the company over the past five years, it said in a statement.

It cited its 2010 acquisition of ICO Inc, where it achieved $15 million of synergies, one year ahead of schedule.

A Schulman estimates that the acquisition of Ferro would provide annual synergies of $35 million, including consolidation of corporate offices, integration of the plastics business, pricing and sourcing efficiencies, cross selling and value selling.

Ferro is a leading global supplier of technology-based performance materials for manufacturers. Its materials improve the performance of products in several end markets, including building and construction, automotive, appliances, electronics, household furnishings, pharmaceuticals, and industrial products.

The company has approximately 4,950 employees globally and reported 2011 sales of $2.2 billion.

In October last year, Ferro posted a third-quarter loss of $316 million after writing down a significant amount related in part to its loss making solar pastes business.

Early last month, it sold its solar pastes business to Germany-based precious metals and technology company Heraeus for an undisclosed sum.

A Schulman is an international supplier of high-performance plastic compounds and resins to customers spanning a wide range of markets such as packaging, mobility, building and construction, electronics and electrical, agriculture, personal care and hygiene, sports, leisure and home, custom services and others.

The company has 34 manufacturing facilities globally and had net sales of $2.1 billion for the fiscal year ended 31 August 2012.