Specialty chemicals maker
) has struck a deal to divest its Water Technologies unit to a
fund managed by private investment firm Clayton, Dubilier &
Rice for roughly $1.8 billion.
The Water Technologies unit, which has annual sales of $1.7
billion, offers specialty chemicals and services to the pulp and
paper and industrial water markets. Ashland's Board had been
reviewing alternative opportunities for the unit since Jul 2013.
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Ashland was reportedly in talks with potential suitors for the
Water Technologies unit in Nov 2013. The company was pressed by
hedge-fund firm Jana Partners (a major shareholder) last year for
a corporate restructuring, including potential sale of its
Revenues from the Water Technologies division rose 4% year over
year to $436 million in first-quarter fiscal 2014 (ended Dec 31,
2013) aided by gains across pulp and paper and the industrial
The divestment will allow Ashland to focus on its core specialty
chemicals business and boost shareholder returns. The
transaction, which is subject to regulatory clearances and other
closing conditions, is expected to complete by the end of
Ashland's fiscal year (ending Sep 30, 2014).
) is acting as financial advisor to Ashland on the deal.
Ashland anticipates roughly $1.4 billion in net proceeds from the
sale, which it will mainly use to return capital to shareholders
through share repurchases. In sync with this goal, the company's
Board has approved a $1.35 billion share buyback program,
effective immediately. This new repurchase program, which will
expire on Dec 30, 2015, replaces Ashland's earlier $600 million
buyback program, which had around $450 million remaining.
The sale of the Water Technologies unit coupled with Ashland's
other ongoing restructuring initiatives will help the company to
achieve EBITDA margins that rank among the top 25% of its
specialty chemicals peer group.
Ashland, which currently operates through four segments, offers
specialty chemicals in more than 100 countries. Its Consumer
Markets segment markets Valvoline, the world's first lubricating
oil. Following the sale of the Water Technologies unit, the
company will have three commercial units - Specialty Ingredients,
Performance Materials and Valvoline.
Ashland is a Zacks Rank #3 (Hold) stock.
Other companies in the chemical space worth considering include
Northern Technologies International Corp.
) with both carrying a Zacks Rank #1 (Strong Buy).