Ashland Inc. (ASH) has wrapped up the earlier announced sale of its elastomers business to synthetic rubber maker Lion Copolymer Holdings. The financial terms of the deal, which was announced in Oct 2014, were not divulged.
The elastomers business, based in Port Neches, TX, mainly caters to the North American replacement tire market. It was purchased by Ashland in Aug 2011 as part of the company’s International Specialty Products acquisition. The company runs a 250-person manufacturing plant in Port Neches that serves elastomers customers.
The business represented roughly 18% of Ashland Performance Materials’ sales of $1.6 billion for fiscal 2014 (ended Sep 30, 2014).
The move to dispose the elastomers business is in sync with Ashland’s strategy of selling non-core assets and reinvesting in higher-margin, specialty chemical businesses that offer attractive growth opportunities.
On the other hand, the buyout is a strategic fit for Lion Copolymer as the size of the Port Neches facility, access to feedstock and excellent storage capacity and specialty products offer it a compelling growth opportunity.
Ashland offers specialty chemicals in more than 100 countries. It markets Valvoline, the world’s first lubricating oil. The company, in Aug 2014, completed the sale of its Water Technologies unit to a fund managed by private investment firm Clayton, Dubilier & Rice for roughly $1.8 billion. The divestment allows Ashland to focus on its core specialty chemicals business and boost shareholder returns.
With the closure of the Water Technologies unit sale, Ashland now has three commercial units – Specialty Ingredients, Performance Materials and Valvoline.
Ashland is a Zacks Rank #3 (Hold) stock.
Other companies in the specialty chemical space worth considering include Minerals Technologies Inc. (MTX), NL Industries Inc. (NL) and Taminco Corporation (TAM). All of them hold a Zacks Rank #1 (Strong Buy).
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