Ashland Inc., the biggest producer of specialty papermaking chemicals, rose the most in 17 months on speculation that a 7.4 percent stake acquired by activist investor Jana Partners LLC may lead to a breakup of the company.
Ashland climbed 9.9 percent to $86.66 at the close in New York, the biggest gain since Nov. 30, 2011, according to data compiled by Bloomberg. The shares had dropped 2 percent this year before today.
Jana owned 5.81 million Ashland shares as of April 10, including options to buy stock, the New York-based company said yesterday in a regulatory filing. Jana’s investment draws attention to Ashland’s undervalued shares and should influence management to hasten plans for boosting value, said Chris Shaw, an analyst at Monness Crespi Hardt & Co.
“Jana could very well push for a breakup, seeking a sale of non-core businesses like water and performance materials,” New York-based Shaw said in a note today. “We think there could be a high likelihood that asset sales happen.” He recommends buying the shares.
Jana has spoken with Ashland management and may take steps “to bring about changes to increase shareholder value,” the hedge fund said in the filing. The shares are undervalued, Jana said.
Gary L. Rhodes, a spokesman for Covington, Kentucky-based Ashland, and Charles Penner, a spokesman for Jana, declined to comment today.
Ashland’s water treatment and performance-materials units, which makes chemicals used in packaging, mining, tires and energy production, are the smallest of four businesses and accounted for 40 percent of the company’s $8.21 billion of revenue last year, according to data compiled by Bloomberg.
Water treatment and performance materials would sell for a higher multiple than Ashland as a whole trades for, and divestitures would boost the value of the two remaining businesses, including the consumer markets business, which makes Valvoline motor oil, Shaw said.
Ashland said last month that fiscal second-quarter profit will be lower than forecast because of weaker-than-expected demand in February. That followed first-quarter earnings that trailed analysts’ estimates because of lower sales volumes in the specialty-ingredients unit.
Jana, which has been pushing for changes at Calgary-based fertilizer producer Agrium Inc. since May, said executives spoke with Ashland management about “the business, capitalization, corporate structure, operations, strategy and future plans,” according to the filing. Jana said it expects to have more discussions with Ashland managers and possibly with directors.