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Ashland To Split Into Two Companies

Spin-Off: Focus on specialty chemicals leads to separation from Valvoline

by Marc S. Reisch
September 25, 2015 | A version of this story appeared in Volume 93, Issue 38

Without Valvoline, Ashland will focus on specialty chemicals.
a For the 12 months ending on June 30. SOURCE: Ashland
A pie chart shows that Ashland’s specialty chemicals, performance materials, and Valvoline units make up 42%, 22%, and 36% of total sales.
Without Valvoline, Ashland will focus on specialty chemicals.
a For the 12 months ending on June 30. SOURCE: Ashland

Following similar moves by DuPont and Air Products & Chemicals, Ashland plans to separate into two independent firms: Ashland, a specialty chemicals and materials maker with $3.6 billion in annual sales, and Valvoline, an engine oil retailer with $2.0 billion in sales. Shareholders will own stock in both firms when the tax-free separation is complete in about a year.

The split “will generate significant value for shareholders,” says CEO William A. Wulfsohn, “by enabling each company to focus on its specific business and strategic priorities.” Wulfsohn will continue to lead Ashland after the spin-off.

For Valvoline, those priorities include growing its instant oil change stores and engine oil sales. For Ashland, they involve expanding a business in specialty chemicals and materials for personal care, pharmaceuticals, food and beverages, and construction.

Ashland’s split was not unexpected. It caps a period during which the one-time regional oil refiner became a big specialty chemical maker by acquiring Hercules, in 2008, and International Specialty Products, in 2011. The decision to hive off Valvoline followed a strategic review under Wulfsohn, who succeeded longtime CEO James O’Brien in January.

The plan also follows a recent trend toward portfolio simplification among chemical makers, sometimes with the prodding of activist investors. Indeed, O’Brien sold Ashland’s water technologies business last year under pressure from activist investor Jana Partners, which held 7% of Ashland’s stock at the time. Jana now holds less than 1% of Ashland’s shares.

Other firms have also simplified their businesses. For instance, DuPont spun off Chemours in July under pressure from investor Nelson Peltz. Earlier this month, Air Products CEO Seifi Ghasemi, hired last year after activist investor William Ackman acquired a nearly 10% stake in the company, said he would spin off the firm’s chemical business to shareholders.

If Ashland’s split turns out to be a good move, other chemical firms might follow, observes Laurence Alexander, a stock analyst with investment banking firm Jefferies. “Proof that self-help initiatives are working could trigger share price increases,” he wrote in a report to clients.


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