InterviewCorrected: Ashland eyes debt pay down, more changes after ISP deal

31 May 2011 19:21  [Source: ICIS news]

Ashland CEOCorrection: In the ICIS news story headlined "Ashland eyes debt pay down, more changes after ISP deal" dated 31 May 2011, please read in the seventh paragraph …emulsion styrene-butadiene rubber (ESBR)… instead of …solution styrene-butadiene rubber (SSBR)…. A corrected story follows.

By Joseph Chang

NEW YORK (ICIS)--US-based Ashland plans to pay down debt while continuing to change into a high-margin, high-growth specialty chemicals company following its planned acquisition of US-based International Specialty Products (ISP), Ashland’s chief executive said on Tuesday.

“This has been a transformational story for Ashland. [The Hercules acquisition] was our first choice to upgrade our position in specialty chemicals, and ISP will define us. But the story is not fully written,” said chairman and CEO James O’Brien in an interview with ICIS.

“We will focus on paying down debt,” he added.

Ashland has agreed to buy ISP for $3.2bn (€2.2bn) in cash, representing a multiple of 8.9 times earnings before interest, tax, depreciation and amortisation (EBITDA) of $360m for the 12 months ended March 31.

The deal will expand Ashland’s positions in the personal care, pharmaceutical, food and beverage and oilfield chemicals markets.

After the close of the deal, expected before the end of September, about 74% of Ashland’s EBITDA will be from specialty chemicals businesses, O’Brien said.

The company’s other businesses will include Ashland’s performance materials unit, which includes unsaturated polyester resins (UPS), vinyl ester resins and adhesives. The ISP businesses will include butanediol (BDO) and emulsion styrene-butadiene rubber (ESBR).

O’Brien would not say outright if these businesses would be considered for divestiture.

“As we have transformed the company through the years, we have always looked to buy and sell businesses at their best value,” O’Brien said .

“Right now we are pressing on our performance materials and our water technologies businesses to improve their margins,” he added.

On the ISP side, its BDO businesses are on the lower ends of its 5-year historical sales growth matrix, as depicted on a presentation by Ashland to the financial community earlier on Tuesday.

Ashland’s planned acquisition of ISP builds upon Ashland’s Aqualon functional ingredients business (personal care, food and beverage, pharmaceutical, oilfield chemicals, coatings) – which came with the acquisition of US specialty chemicals firm Hercules back in November 2008.

“After we acquired Hercules, we looked at its Aqualon business and wanted to grow that portion. We saw broader opportunities in personal care and food and beverage, and ISP was our number-one choice,” O’Brien said.

“ISP was always on the top of our list of acquisition candidates. We had the capacity to buy, and were in a fortunate position when the family wanted to transact,” he added.

ISP is closely held by the Heyman family. Former ISP chairman and owner Sam Heyman died in 2009.

Shares of Ashland were trading at $68.14 on the New York Stock Exchange as of 14:13 hours New York time (18:13 GMT), up 11.69%.

($1 = €0.70)

For more on SBR visit ICIS chemical intelligence
For more on Ashland visit ICIS company intelligence


By: Joseph Chang
+1 713 525 2653



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