Ashland Water Technologies Sale Anticipated By Jana Partners


Specialty chemical company Ashland Inc. (NYSE:ASH) will sell its Ashland Water Technologies to a fund managed by Clayton, Dubilier & Rice in a transaction valued at approximately $1.8 billion.

Ashland’s move anticipated by activist hedge fund

The move was anticipated by activist hedge fund Jana in their 4th quarter investor letter. The December 2013 Jana letter noted Ashland Inc. (NYSE:ASH) had announced Stephen Kirk joined the board of directors, a candidate that JANA introduced to Ashland.  In the same breath the December letter noted that Ashland management indicated to Jana the sale of the water division was on track for the first quarter of 2014, which was announced today.

“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,” said James J. O’Brien, Ashland chairman and chief executive officer. “We believe this transaction, when combined with our ongoing global restructuring, will help position Ashland Inc. (NYSE:ASH) for EBITDA margins that rank among the top 25 percent of specialty chemical companies.”

With annual sales of $1.7 billion and approximately 3,000 employees worldwide, Water Technologies is among the leading suppliers 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.”

As anticipated, proceeds devoted to share repurchase

The December Jana letter noted that proceeds from the sale were expected to go to share repurchases, which was the case.  Ashland Inc. (NYSE:ASH) announced they expect 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 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.

“Earnings expectations for 2014 have been conservatively based after a difficult year for the Special Ingredients segment in 2013,” the Jana December 2013 investor letter noted. “We await further details of the corporate review but currently believe that shareholders would be rewarded in the event of a Valvoline spin-off,” pointing to future expectations.

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About the Author

Mark Melin
Mark Melin is an alternative investment practitioner whose specialty is recognizing a trading program’s strategy and mapping it to a market environment and performance driver. He provides analysis of managed futures investment performance and commentary regarding related managed futures market environment. A portfolio and industry consultant, he was an adjunct instructor in managed futures at Northwestern University / Chicago and has written or edited three books, including High Performance Managed Futures (Wiley 2010) and The Chicago Board of Trade’s Handbook of Futures and Options (McGraw-Hill 2008). Mark was director of the managed futures division at Alaron Trading until they were acquired by Peregrine Financial Group in 2009, where he was a registered associated person (National Futures Association NFA ID#: 0348336). Mark has also worked as a Commodity Trading Advisor himself, trading a short volatility options portfolio across the yield curve, and was an independent consultant to various broker dealers and futures exchanges, including OneChicago, the single stock futures exchange, and the Chicago Board of Trade. He is also Editor, Opalesque Futures Intelligence and Editor, Opalesque Futures Strategies. - Contact: Mmelin(at)

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