Ashland Explores Composites/BDO Options
US specialty chemicals company Ashland is exploring strategic alternatives for its composites business as well as its butanediol (BDO) production plant in Marl, Germany, and the related merchant intermediates and solvents products.
The move is part of the company’s aim to create a more streamlined operation with a portfolio focused on specialty ingredients.
Ashland said it intends to evaluate all options for the assets, including a potential sale. The company noted, however, that it plans to retain its BDO plant in Lima, Ohio, USA, to ensure consistent supply for the group’s internal needs.
The global composites business, which posted sales of $779 million in 2017, makes a range of unsaturated polyester and vinyl ester resins across 14 plants in the US, Brazil, China, Finland, France, Spain and Poland.
Should Ashland decide to sell the assets, it expects to sign an agreement by the end of 2018. The company has retained US investment bank Citi to assist in its strategic review.
The company expects to use the proceeds from a possible sale primarily to reduce debt and repurchase shares. Ashland’s board has approved a new $1 billion share repurchase authorization to provide flexibility. This replaces a previous authorization, which had around $500 million remaining.
"Given the strong performance of these businesses, as well as recent tax reform changes, we believe it is the right time to initiate this review. With a more streamlined and focused product portfolio, improved margins, and reduced earnings volatility, Ashland will be better positioned to deliver sustained earnings growth and unlock significant value for shareholders,” said Bill Wulfsohn, Ashland’s chairman and CEO.
Wulfsohn added that he expects the combination of good financing availability, low interest rates, a healthy macroeconomic environment and tax reform tailwinds to support a potential sale of the assets.
Ashland has trimmed several assets in recent years as it positions itself as a specialty chemicals player. Last May, it completed the final separation of its Valvoline engine lubricants subsidiary, having sold its Valvoline car-care products line to Niteo in 2015. Ashland also sold its industrial biocides assets to Troy Corporation in July 2015.
Last May saw Ashland pay $660 million for Pharmachem Laboratories, a manufacturer of nutrition and fragrance products. Commenting at the time, Wulfsohn said the acquisition offered opportunities in higher-margin end markets while also strengthening its specialty portfolio.