Ashland Inc. will sell construction division

0 Comments | Deseret News (Salt Lake City), Aug 22, 2006 | by Bruce Schreiner Associated Press

LOUISVILLE, Ky. -- Chemicals and construction company Ashland Inc. said Monday it has agreed to sell its highway construction division to integrated construction materials holding company Oldcastle Materials Inc. for $1.3 billion, allowing Ashland to focus on its core chemical operations. Ashland shares tumbled nearly 6 percent.

The sale of Ashland Paving And Construction to Oldcastle, a subsidiary of Ireland-based CRH PLC, has received antitrust clearance and is expected to close by the end of August, said Covington-based Ashland. It continues a redirection for Ashland, which last year sold its minority stake in a petroleum refining and marketing company.

Shares of Ashland fell $3.80, or 5.7 percent, to close at $62.55 on the New York Stock Exchange, where they have traded in a 52-week range of $50.45 to $75.17.

"The plunge in the stock was mostly due to the fact that the consensus expectations for proceeds from the sale were well north of what they received," said Laurence Alexander, an analyst with Jefferies & Co.

Oldcastle Materials, based in Washington, D.C., has more than 13,000 employees in 30 states and generated more than $3.5 billion in revenues in 2004. CRH said the deal represents a major expansion of its U.S. business into the Midwest and South.

Liam O'Mahony, CRH's chief executive, said in a statement that the deal "represents a major milestone in the development of our Americas Materials business and the largest-ever transaction to be completed by CRH."

APAC, with about 9,700 employees, operates in 14 Southern and Midwestern states. It has 93 facilities where rock, sand and gravel are produced, 31 ready-mix concrete plants, 226 hot-mix asphalt plants and more than 13,000 pieces of mobile equipment. APAC posted revenues of about $2.5 billion in the fiscal year ending last Sept. 30.

"Today, Ashland sharpens its focus on its future as a diversified chemical company," Ashland Chairman and Chief Executive James J. O'Brien said.

O'Brien said Ashland was pleased with APAC's recent performance, but called the sale "an important step in achieving Ashland's strategic objectives."

With the sale, Ashland will consist of four chemical divisions -- Ashland Performance Materials, Ashland Distribution, Valvoline and Ashland Water Technologies.

"This is our future and it's a very bright one," O'Brien said in a conference call with analysts.

Ashland said it intends to use after-tax proceeds from the deal to complete an ongoing share repurchase plan and for a special cash dividend. It also plans an additional stock repurchase plan which, combined with the current buyback, would be limited to about 10 million shares. Ashland's management will make those recommendations at the company's September board of directors meeting. Ashland said it has repurchased about 4 million shares in the past year as part of the plan.

"Maximizing shareholder value is the motivation," said Ashland spokesman Jim Vitak.

O'Brien said the company will have the financial flexibility to pursue internal growth and to seek acquisitions "that complement and strengthen our core chemical businesses."

Alexander said he expects Ashland to follow a "disciplined" acquisition strategy.

"The company is still a work in progress," he said. "They clearly need to establish more scale in their chemical businesses."