The lubricants industry was abuzz after a New York Post article Friday reported Ashland began shopping its Valvoline division to pay down debt, and speculated it could fetch as much as $1 billion.
Ashland would not confirm the report. We dont comment on market rumors or speculation, Ashland spokesman Jim Vitak told Lube Report.
Citing unidentified sources, the newspaper said the first round of bids came within the past several days and that among those making it to the second round were Prestone and several private-equity firms bidding individually. Danbury, Conn.-based Prestone is a unit of Honeywell Consumer Products Group, whose products include antifreeze and oil, air, transmission and fuel filters. According to the report, Ashland hired Banc of America Securities to lead the auction.
In its January 27 announcement of fourth quarter 2008 earnings, Ashland Chairman and CEO James O’Brien emphasized the companys primary objective in the near term as an organization was to generate cash and pay down debt. We are focused on generating cash and savings from six sources: increased profitability from sales; reductions in costs, working capital, capital expenditures and dividends; and the sale of nonstrategic assets, OBrien said. Everyone in Ashland has responsibility to generate cash from one or several of these sources. We’ve made progress in all of these areas to date and expect to continue in the coming months.”
Covington, Ky.-based Ashland closed on its $3.3 billion acquisition of Wilmington, Del.-based Hercules last November. The cash portion of the transaction was funded through a combination of cash on hand and debt financing from Bank of America and Scotia Capital. In its fourth quarter 2008 earnings announcement, Ashland said it incurred net interest and other financing expenses of $28 million in the quarter, primarily as a result of the issuance of debt to fund the Hercules acquisition.
With the Hercules acquisition, Ashland said the company comprised a core of three specialty chemical businesses that would drive the company both strategically and financially.
An analyst, who declined to be identified, told Lube Report that Ashland selling Valvoline would make sense, because thats the only part of the business that doesnt fit well with what they do now.
Valvoline markets, distributes and produces motor oils, transmission fluids, gear oils, hydraulic lubricants, automotive chemicals, specialty products, greases and cooling system products.