US Ashland stays committed to Hercules deal

28 October 2008 16:28  [Source: ICIS news]

HOUSTON (ICIS news)--US specialty chemicals major Ashland is still committed to its pending $2.60bn (€2.08bn) cash-and-stock acquisition of Hercules despite sharp declines in profits and the current economic climate, CEO James O’Brien said on Tuesday.

Covington, Kentucky-based Ashland reported on Tuesday a fourth-quarter net loss of $10m, down 69% from $32m net profits in the same period last year.

US water and paper chemicals producer Hercules, based in Wilmington, Delaware, reported on Monday third-quarter net profits of $39.5m, down 19% from $48.8m reported for the same time last year.

"While the economic environment continues to present an increasing challenge to near-term performance, we are making a number of strategic moves that enable us to strengthen our profile as a specialty chemicals company,” O’Brien said in a conference call with investors.

“Most important among these is the pending acquisition of Hercules, which will dramatically enhance our focus and scale in specialty additives and ingredients and paper and water technologies,” O’Brien said.

The acquisition would create a major, global specialty chemicals company with around 75% of its earnings before interest, taxes, depreciation and amortisation (EBITDA) derived from specialty chemicals, O’Brien said.

“While this is not ideal market for financial transactions, the strategic reasons have not changed,” O’Brien said. 

O’Brien said the acquisition will eventually reduce earnings volatility, improve profitability and strengthen cashflow generation.

Ashland manufactures composite polymers, adhesives, metal casting consumables, lubricants and automotive chemicals, which it supplies to a range of industries worldwide.

Hercules makes and supplies specialty chemicals for the pulp and paper industry, water-soluble polymers - in particular cellulose derivatives and guar - and wood rosin products.

The European Commission approved the proposed acquisition of Hercules by Ashland earlier this month.

Hercules shareholders will vote on the transaction at a meeting on 5 November. If approved, the deal is expected to close on 13 November.

($1 = €0.80)

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Author: Heather McGuire Doyle
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