Ashland to buy Pharmachem for $660 million

Ashland has agreed to acquire New Jersey-based Pharmachem Laboratories, a manufacturer of supplements and specialty ingredients for the wellness and personal care industries, for $660 million in cash.

The deal will deepen Ashland’s move into consumer markets and shrink the industrial portion of its business. The company has been shifting focus since 2011 when it bought International Specialty Products. In 2014, Ashland sold its water technologies business. Ashland is also working to spin off Valvoline, its motor oil and oil change retail operation.

The ISP acquisition brought structural ingredients such as emulsifiers and polymers for the personal care, detergents, and food and beverage markets, along with pharmaceutical excipients. Pharmachem will add specialty active ingredients such as botanical extracts and vitamins. In addition, Ashland will get Pharmachem’s processing and custom manufacturing business.

“This combination will enhance our position in fast-growing nutraceutical end markets, open a new opportunity within fragrances and flavors, and strengthen Ashland’s food ingredient business by adding customized functional solutions,” CEO William A. Wulfsohn says.

Pharmachem’s 2016 revenues were approximately $300 million. The company markets a number of branded supplements, including Phase 2 Carb Controller, an extract from white kidney beans said to reduce the caloric impact of starchy foods. Other Pharmachem supplements claim to block glucose, lower cholesterol, and decrease wrinkles.

In addition to branded products, Pharmachem supplies vitamins, minerals, amino acids, and botanical extracts to downstream supplement makers. Some of the botanicals, such as Rhodiola rosea, used to counter anxiety, have a history of use in traditional medicine. The firm also extracts the fragrance ingredient sclareol from the clary sage plant and nicotine from tobacco.

The deal is expected to close by the end of June and will bring with it manufacturing operations in New Jersey, California, North Carolina, Utah, Wisconsin, and Mexico. According to Ashland, the purchase will boost earnings as early as this year and bring roughly $10 million in cost synergies. It will shift the proportion of Ashland’s sales to consumer pharmaceutical markets to 42% from 36%.