July 25 (Bloomberg) -- Ashland Inc. plans to sell an elastomers unit and will consider the divestment of a water-treatment business, transactions that could eliminate $2 billion from the U.S. chemical maker’s revenue.
A sale process has already started for the elastomer tire-materials business, it said in a statement today. The asset, inherited with the purchase of International Specialty Products for $3.2 billion, generates about $330 million in sales. The Covington, Kentucky-based company is also considering options, including a disposal, for its water-treatment business, which had $1.73 billion in revenue last year.
“We are committed to unlocking value for Ashland shareholders,” Chief Executive Officer James O’Brien said in the statement. “While Water Technologies’ performance has improved this year, we believe that evaluating strategic options, including a possible sale, will help us determine the best path forward for this business.”
The 2011 takeover of cosmetic and shampoo-ingredient maker ISP, which at the time had sales of $1.6 billion and earnings before interest, taxes, depreciation and amortization of $360 million, is giving O’Brien the leeway to consider exiting operations with lower growth prospects.
Ashland rose 2.8 percent to $88.82 at 10:20 a.m. in New York trading.
Ashland appointed Luis Fernandez-Moreno, a former Dow Chemical Co. executive, to head the water technologies division in late 2012 to improve profitability. At the time, O’Brien said the problems with the business were at an “executive level” rather than an industry problem.
Citigroup is working as an adviser to help evaluate options for water technologies, Ashland said.
The unit reported a 2 percent advance in fiscal third-quarter sales to $435 million, with Ebitda rising 11 percent to $41 million.
Ashland’s adjusted earnings per share fell to $1.66 from $2.04 a year earlier, missing the $1.83 estimate of analysts in a survey.
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