US Ashland asset sales likely to be accelerated – analyst

15 April 2013 22:40  [Source: ICIS news]

NEW YORK (ICIS)--US-based chemical producer Ashland is likely to accelerate potential asset sales following an activist investor taking a stake in the company, one Wall Street analyst said on Monday.

“We believe last week’s 13D filing by a well-known activist will accelerate what was likely already to occur at Ashland over the next 12-24 months: the sale of Water Technologies and Performance Materials, and the tax-efficient spin[-off] of Valvoline,” said Deutsche Bank analyst David Begleiter in a research note.

On 11 April, activist investment firm JANA Partners disclosed in a 13D filing with the US Securities and Exchange Commission that it had acquired a 7.4% stake in publicly traded Ashland.

In the filing, JANA said it has had discussions with Ashland’s management regarding corporate structure, strategy and future plans, among other items.

JANA said it plans to continue having these discussions and “may take other steps seeking to bring about changes to increase shareholder value."

Ashland’s performance materials segment includes unsaturated polyester resins (UPR), vinyl ester resins and adhesives, used in transportation, marine and construction end markets.

Feedstocks for UPR include maleic anhydride (MA) and propylene glycol.

In the fiscal year ended September 2012, the performance materials segment posted operating income of $99m (€75m) on sales of $1.56bn, for an operating margin of 6.3%.

This was considerably lower than the margins for Ashland’s core specialty ingredients segment at 15.9%.

Its specialty ingredients segment serves the personal care, pharmaceutical, food and beverage, coatings and energy end-markets.

The water technologies segment also lagged with a 4.2% operating margin in fiscal 2012, as it earned $72m on sales of $1.73bn.

“Most recently, Ashland has stated that [water technologies] is on a short leash to show improvement by year-end. Otherwise, it would look to possibly divest this business,’ said Begleiter.

Ashland’s Valvoline lubricants business is under its consumer markets segment. This business recorded $236m in operating profit on $2.03bn in sales in fiscal 2012, for an operating margin of 11.6%.

($1 = €0.76)

By: Joseph Chang
+1 713 525 2653

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