InterviewUS Ashland seeks acquisitions in Aqualon, Water units

08 November 2010 22:43  [Source: ICIS news]

By Joseph Chang

NEW YORK (ICIS)--US-based specialty chemical company Ashland will seek to make bolt-on acquisitions in its Aqualon and Water Technologies units with proceeds from the sale of Ashland Distribution, its chief executive said on Monday.

“Going forward, our primary reinvestment plan would be to make bolt-on acquisitions in the $100–300m (€71–213m) range in the Aqualon and Water Technologies businesses,” said Ashland chairman and CEO James O’Brien in an interview with ICIS.

“We would weigh these options versus stock buybacks and dividend increases,” he added.

Ashland's Aqualon Functional Ingredients business makes products that manage physical properties in aqueous and non-aqueous systems, the company said. Its products are used in diverse end markets such as paints and coatings, personal care, construction materials, food and pharmaceuticals.

Meanwhile, Ashland's Hercules Water Technologies business makes industrial water treatment chemicals, many of which are based on acrylic acid.

“We see a decent [mergers and acquisitions] pipeline. We are evaluating several opportunities and discussions are taking place,” said O’Brien.

“Post-divestiture, we have about a 50/50 split between sales in the US and the rest of the world, with 20% in China and South America. We would look to maintain those levels with acquisitions,” he added.

O’Brien said he would not rule out a larger deal, but said the company was not interested in adding a fifth leg to its now four core businesses of Aqualon, Water Technologies, Performance Materials and Consumer Markets (Valvoline).

Ashland announced the sale of Ashland Distribution to private equity firm TPG Capital for $930m. The deal is expected to close before the end of March 2011.

“We conducted an extensive auction process and had many interested parties – both strategic and private equity players. We think we sold at a fair price,” said O’Brien.

Ashland Distribution said it had 12-month trailing earnings before interest, tax, depreciation and amortisation (EBITDA) of around $89m, making for a transaction multiple of 10.4 times EBITDA.

However, a source familiar with the deal said the business had EBITDA of $122m in the 12 months through September 2010, excluding allocated corporate costs that the buyer would not assume. That would make for a more modest multiple of 7.6 times EBITDA.

($1 = €0.71)

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By: Joseph Chang
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