Ashland will sell its global distribution business – whose products include lubricant and elastomer additives and metalworking fluids – to TPG Capital for $930 million. The transaction is expected to close prior to the end of 2011s first quarter.
The Ashland Distribution business distributes chemicals, solvents and raw materials used in industrial and industrial-grade applications. With annual revenues of $3.4 billion, it has about 2,000 employees across North America and Europe, and entered the China plastics market in 2009.
TPG Capital is the global buyout group of TPG, a Fort Worth, Texas-based private investment firm with more than $47 billion of assets. TPGs investments in the energy, chemicals and industrials sector have included Kraton Polymers and, under contract, Marathon Oils Minnesota downstream assets.
Weve been saying all along that our transformation is into a global specialty chemicals company, Jim Vitak, spokesman for Covington, Ky.-based Ashland, told Lube Report. When you look at the other commercial units of Ashland, the four other than Ashland Distribution have margins that are typical of a specialty chemical company. Ashland Consumer Markets (Valvoline), with its double digit type margins, fit the profile of the other commercial units, he noted. Distributions range of profitability is much narrower, and it didnt fit the definition, Vitak added.
Selling the distribution business to TPG represented an opportunity for both Ashland and Ashland Distribution to move into their next stages, Vitak pointed out. TPG has no businesses that distribute lubricant additives or metalworking products.
TPG is a very serious investor, and its a large company, he continued. Ashland Distribution is not going into a situation where theyre being merged with another distributor thats going to have a lot of overlap. We had strong interest in the property, and TPG was very highly interested and engaged in getting the property.
TPG has a long history of helping former subsidiaries thrive as independent companies, said Kevin Burns, partner at TPG Capital. With our experience in chemicals and distribution, and the management teams deep knowledge of the sector, the potential is high for continued strong performance at Ashland Distribution.
Ashland Distribution has partnerships with many of the worlds leading chemical manufacturers. According to line cards on its web site, suppliers Ashland Distribution worked with have included Afton, Pilot, Albemarle, AkzoNobel, Dow, Dow Corning, Hercules, Rhodia, Sonneborn and TPC Group (formerly called Texas Petrochemical), among others.
The supply and distribution agreements we have with different companies transfer over, so theres no disruption, Vitak asserted. Its a very clean separation thats going to be made. TPGs acquisition includes Ashland Distributions management team and employees, he added. Its a pretty smooth transfer, and that should be very good for the customers to understand – theyre not going to see a dramatic or disruptive change.
According to Vitak, once the transaction has closed, TPG will retain the Ashland Distribution name for an interim transition period for continuity, while it decides what to rename it.