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November 15, 2010
Volume 88, Number 46
p. 8

Ashland To Divest Distribution Unit

Restructuring: Company will focus on specialty chemicals

Alexander H. Tullo

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Ashland has specialized in distributing mixed truckload and less than truckload quantities. Ashland
Ashland has specialized in distributing mixed truckload and less than truckload quantities.

Ashland has agreed to sell its Ashland Distribution unit to TPG Capital for $930 million. TPG, a private equity firm, is also an investor in elastomers maker Kraton Performance Polymers.

Ashland Distribution is the third-largest chemical distributor in the world, behind Germany’s Brenntag and the U.S.’s Univar, according to figures from Brenntag.

The distribution unit generated sales of $3.4 billion in the fiscal year that ended on Sept. 30, representing 37% of Ashland’s total revenues. But its $89 million in earnings before taxes over the same period made up only about 10% of Ashland’s profits.

“The sale of Ashland Distribution is not about its performance,” Ashland CEO James J. O’Brien told analysts. “The sale reflects Ashland’s strategic direction and completes a major step in our multiyear transformation into a high-performing specialty chemicals company.”

Ashland sold its 38% stake in Marathon Ashland Petroleum in 2005 to its partner, Marathon Oil, for $3.7 billion. The next year, it sold its road construction unit to Oldcastle Materials for $1.3 billion. It bought specialty chemical maker Hercules for $3.3 billion in 2008.

O’Brien said Ashland is done divesting and will now focus on its four core businesses: Aqualon functional ingredients, paper and water treatment chemicals, unsaturated polyester and vinyl ester resins, and Valvoline automotive lubricants. “We are going to ride these horses into the future,” O’Brien said, noting that he wants to make “bolt-on” acquisitions—for prices between $100 million and $300 million—in functional ingredients and water treatment.

Dealmaking in the chemical distribution business has been brisk this year. Brenntag raised more than $900 million in an initial public offering (IPO) in March. Univar postponed an IPO in September when its owner, CVC Capital Partners, decided to sell a 42.5% interest to another private equity firm, Clayton, Dubilier & Rice.

Buckingham Research analyst John E. Roberts wrote to clients that the Ashland deal was “not unexpected given that Ashland has labeled distribution as noncore, and monetization options have been rumored since key peer Brenntag went public.”

Chemical & Engineering News
ISSN 0009-2347
Copyright © 2011 American Chemical Society
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