Ashland has signed a definitive agreement to sell Ashland Water Technologies to a fund managed by Clayton, Dubilier & Rice in a transaction valued at approximately $ 1.8 billion. The transaction is expected to close by the end of Ashland’s fiscal year on September 30, 2014, contingent on certain customary regulatory approvals, standard closing conditions and completion of required employee information and consultation processes.
The company expects net proceeds from the sale to total approximately $ 1.4 billion, which primarily will be used to return capital to shareholders in the form of share repurchases. In keeping with this intent, Ashland’s board of directors has authorized a $ 1.35 billion common stock repurchase program, effective immediately. This new authorization replaces Ashland’s previous $ 600 million buyback program, which had approximately $ 450 million remaining. The new repurchase program will expire December 31, 2015.
With annual sales of $ 1.7 billion and approximately 3,000 employees worldwide, Water Technologies is a leading supplier of specialty chemicals and services to the pulp and paper and industrial water markets. Over the past year, the commercial unit has reported significant improvements in its business and financial performance as a result of a plan to simplify the organization, focus on key growth opportunities, and deliver better service and value to customers. The result has been steady profit growth and improved margins.
«Thanks to the hard work and commitment of the entire team, Water Technologies has shown tremendous improvement over the past year, and I believe it is well positioned to build on that momentum under Clayton, Dubilier & Rice ownership,» said James J. O’Brien, Ashland chairman and chief executive officer. «This divestiture allows us to focus on our core specialty chemicals business and to accelerate return of capital to shareholders, while Water Technologies should have an opportunity to invest in continued growth under new ownership. We believe this transaction, when combined with our ongoing global restructuring, will help position Ashland for Ebitda margins that rank among the top 25 percent of specialty chemical companies.»
Founded in 1978, Clayton, Dubilier & Rice is a private investment firm with an investment strategy predicated on producing financial returns through building stronger, more profitable businesses. Since inception, CD&R has managed the investment of more than $ 19 billion in 59 businesses with an aggregate transaction value of more than $ 90 billion.
«We are excited to be partnering with the AWT management team and look forward to working with them to move the business forward to its next level of profitable growth,» said CD&R Partner David H. Wasserman.
«Ashland Water Technologies has many attractive features, including a very strong competitive position which reflects its global scale, deep set of service capabilities and innovation leadership,» added CD&R Partner George K. Jaquette. «We look forward to working with the management team to build upon the company’s market leadership position.»
Citi is acting as financial advisor, and Cravath, Swaine & Moore LLP and Squire Sanders are acting as legal advisors to Ashland.