TPG to buy Ashland distribution business for $930 million

BANGALORE (BestGrowthStock) – Ashland Inc (ASH.N: ), a chemical maker and owner of the Valvoline brand, said it would sell its distribution business to a unit of private equity firm TPG for $930 million, as it shifts focus to higher-margin specialty chemicals.

Ashland has been moving away from the cyclical commodity chemicals sector and bought specialty chemicals and water technologies company Hercules for $2.6 billion in 2008.

Strong results last month from Bayer (BAYGn.DE: ), Dow Chemical (DOW.N: ) and BASF (BASFn.DE: ) indicated demand for chemicals continues to improve across the globe.

Ashland’s deal with TPG Capital, expected to close before end-March, comes three months after Reuters first reported Ashland was looking to sell the business.

Ashland CEO James O’Brien said in a statement that the deal “completes a major step in our multi-year transformation into a high-performing specialty chemicals company.”

The unit, which distributes chemicals, plastics, composite materials and environmental services in North America, and thermoplastics in Europe, accounted for more than 38 percent of Ashland’s fourth-quarter revenue of $2.38 billion.

While sales at the unit were up 18 percent from a year ago, they dipped below the third quarter.

Shares of Covington, Kentucky-based Ashland, valued at just over $4 billion, were up 2 percent at $52 in pre-market trade. The stock, which closed at $50.94 on Friday on the New York Stock Exchange, is up more than 30 percent year-to-date.

As of September, Ashland had cash of $417 million and long-term debt of $1.1 billion.

Bank of America Merrill Lynch acted as financial adviser to Ashland, while Cravath, Swaine & Moore was primary legal counsel.

Citi, Barclays Capital, Deutsche Bank Securities and Morgan Stanley & Co acted as financial advisers to TPG Capital, with Vinson & Elkins LLP and Cleary Gottlieb Steen & Hamilton LLP acting as legal advisers.

(Reporting by Adveith Nair in Bangalore; Editing by Unnikrishnan Nair and Ian Geoghegan)

TPG to buy Ashland distribution business for $930 million