Ashland Inc. will acquire Hercules for $3.3 billion in a transaction expected to close by the end of this year. Hercules provides a variety of specialty chemicals, including biocides, dispersants and surfactants, and synthetic lubricant basestocks.
Covington, Ky.-based Ashland would acquire all of Hercules outstanding shares for $18.60 per share in cash and .093 of a share of Ashland common stock for each share of Hercules common stock. The agreements terms require Hercules to pay Ashland a $77.5 million fee under certain circumstances, including if Hercules terminates the merger agreement to accept a superior offer. Ashland would be required to pay Hercules the same amount if the transaction is not completed due to a failure to obtain financing at the time merger conditions have been satisfied.
James OBrien, Ashland chairman and CEO, said the acquisition creates a defined core for Ashland composed of three specialty chemical businesses with strong market positions and promising global growth potential: specialty additives and ingredients, paper and water technologies, and specialty resins. In addition, we expect our financial profile to be enhanced significantly through reduced earnings volatility, improved profitability, and stronger cash flow generation.
OBrien said the broader international footprint of the combined companies will offer the specialty resins business expanded global growth opportunities in key building and construction markets, including infrastructure and wind energy. In addition, our distribution and Valvoline businesses provide complementary capabilities and share similar markets with the specialty chemical businesses.
Valvoline, a Lexington, Ky.-based division of Ashland, markets, distributes and produces automotive lubricants, transmission fluids, gear oils, hydraulic lubricants, automotive chemicals, specialty products, greases and cooling system products. It also operates the Valvoline Instant Oil Change quick-lube chain.
Hercules Ventures business – part of its Paper Technologies and Ventures Group – offers a full line of synthetic lubricant basestocks based on pentaerythritol esters, including multiple blending options for automotive, aviation, industrial and specialty lubricant applications. The Ventures portion of the group focuses on expanding into four markets: lubricants, adhesives, water management, and pulp and refining.
OBrien said the joined companies will maintain a significant presence in Wilmington, Del., where Hercules is headquartered. John Panichella, president of Hercules Aqualon group, and Paul Raymond, president of Hercules Paper Technologies and Ventures Group, have agreed to join Ashland after the transactions close, reporting directly to OBrien.
Hercules Aqualon group brings Ashland a significant market position in rheology modifiers, used to alter physical properties of water-based systems. The additives are used to make everything from adhesives and paints to foods, pharmaceutical and personal care products.