Ashland to Divest Elastomers Business to Lion Copolymer
Ashland Inc. (ASH) has agreed to sale its elastomers business to synthetic rubber maker Lion Copolymer Holdings. The transaction, which is subject to regulatory clearances and other closing conditions, is expected to consummate by end of this year. The financial terms of the deal were not divulged.
The elastomers business, based in Port Neches, TX, mainly caters to the North American replacement tire market. It was purchased by Ashland in Aug 2011 as part of the company’s International Specialty Products acquisition. The company runs a 250-person manufacturing plant in Port Neches that serves elastomers customers.
The business represented roughly 17% of Ashland Performance Materials’ sales of $1.6 billion for the trailing 12 months ended Jun 30, 2014.
The move to divest the elastomers business is in tandem with Ashland’s strategy of disposing non-core assets and reinvesting in higher-margin, specialty chemical businesses that offer attractive growth opportunities.
The acquisition is a strategic fit for Lion Copolymer as the size of the Port Neches facility, access to feedstock and excellent storage capacity and specialty products offer it a compelling growth opportunity.
Ashland offers specialty chemicals in more than 100 countries. It markets Valvoline, the world’s first lubricating oil. The company, in Aug 2014, completed the sale of its Water Technologies unit to a fund managed by private investment firm Clayton, Dubilier & Rice for roughly $1.8 billion. The divestment allows Ashland to focus on its core specialty chemicals business and boost shareholder returns.
With the closure of the Water Technologies unit sale, Ashland now has three commercial units – Specialty Ingredients, Performance Materials and Valvoline.
Ashland is a Zacks Rank #3 (Hold) stock.
Other companies in the specialty chemical space worth considering include Flexible Solutions International Inc. (FSI), Globe Specialty Metals, Inc. (GSM) and Minerals Technologies Inc. (MTX). While Flexible Solutions carries a Zacks Rank #1 (Strong Buy), both Globe Specialty and Minerals Technologies hold a Zacks Rank #2 (Buy).
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