Ashland Inc., the chemical maker with activist investor Jana Partners LLC as its second-biggest shareholder, said it plans to sell its water-chemicals unit and cut costs in the remaining businesses.
Bids are being sought for the water-technologies business with a sales agreement expected by March, Covington, Kentucky-based Ashland said today in a statement. The unit had $51 million of earnings before interest, taxes, depreciation and amortization on $441 million of revenue in the three months through September.
Ashland Chairman and Chief Executive Officer James O’Brien expanded the water-technologies division with the $2.6 billion takeover of Hercules Inc. in 2008. Ashland began a strategic review in July after Jana announced its stake in May. Ashland also said today it will reduce company expenses by as much as $200 million.
“These actions should help focus the company and drive up margins and both can be read as having been influenced by Jana,” Chris Shaw, a New York-based analyst at Monness Crespi Hardt & Co. who recommends buying the shares, said in a note today.
Jana in September said it held 8.4 percent of Ashland shares, up from its initially disclosed 7.4 percent stake.
Ashland said it also plans to announce a deal by March to sell its elastomers unit, which supplies synthetic rubber to tire makers. The company in July announced the start of a sales process for the unit with about $330 million in annual sales. Proceeds from both divestitures will be used primarily for share repurchases, O’Brien said today on a conference call.
Ashland today reported fourth-quarter adjusted earnings per share of $1.54, beating the $1.50 average of eight analysts’ estimates compiled by Bloomberg.
Operating profit in the specialty-ingredients unit should increase 3 percent to 5 percent next year, Chief Financial Officer J. Kevin Willis said on the call. Investors may be disappointed by that forecast because it’s significantly less than estimated, Shaw said today by phone.
Ashland fell 6.6 percent to $87.67 at the close in New York, the biggest drop since Nov.9, 2011.