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Ashland (ASH) Reaches Key Milestone in Valvoline Split

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Ashland (ASH - Free Report) has reached an important milestone in its earlier announced plans to separate into two independent, publicly traded companies. The chemical maker said that the company and its bank group have entered into an amendment to Ashland's senior unsecured credit agreement dated Jun 23, 2015. The credit agreement was amended to allow the transactions contemplated by the planned business separation and to make certain associated technical changes.  

Ashland had earlier announced its plans to split the company into two publicly traded companies – Ashland Global Holdings Inc. (comprised of Ashland Specialty Ingredients and Ashland Performance Materials) and Valvoline Inc. (composed of the company’s Valvoline segment). The separation is expected to provide both companies with financial flexibility to achieve their long-term objectives.

Ashland also said yesterday that its fully-owned unit, Valvoline Finco One LLC, has entered into a delayed-draw credit agreement for new senior secured bank facilities. The agreement offers $1.325 billion in financing, comprised of a 5-year secured senior revolving credit facility in an aggregate amount of $450 million and a 5-year senior secured term loan facility in an aggregate principal amount of $875 million.

The credit agreement will be available for borrowings upon the transfer of the Valvoline business to Valvoline Inc. and the satisfaction of other specific conditions which Ashland expects to satisfy in the fall of 2016.  

Ashland also divulged the plans of Valvoline Finco to offer $375 million aggregate principal amount of senior notes due 2024. The notes will be unsecured unsubordinated obligations of Valvoline Finco and will initially be guaranteed on an unsecured basis by Ashland. Valvoline Finco plans to transfer the net proceeds of the offering to Ashland which the latter plans to use to repay borrowings under its senior unsecured credit facilities.

Ashland’s shares rose roughly 2% to close at $120.42 yesterday.

Ashland offers specialty chemicals in more than 100 countries. For over 150 years, Valvoline has been serving the needs of automotive customers all over the world, making it the most recognized premium brand in the global automotive lubricant industry.
 
Revenues from the Valvoline segment were flat year over year at $479 million in the second quarter of fiscal 2016 (ended Mar 31, 2016) as volume gains and favorable product mix was offset by currency headwinds. The segment accounted for roughly 40% of the company’s total sales for the quarter. The fiscal third quarter is the segment’s seasonally strongest, and sales for the quarter are expected in the range of $500−$510 million.

Ashland is a Zacks Rank #4 (Sell).
 
Some better-ranked stocks in the chemical space include Albemarle Corp. (ALB - Free Report) , Axiall Corporation and Huntsman Corporation (HUN - Free Report) , all sporting a Zacks Rank #1 (Strong Buy).

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