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Ashland Sheds Water Technologies Unit in $1.8B Sale

NEW YORK (The Deal) -- Chemicals firm Ashland (ASH - Get Report) said Tuesday it would sell its water technologies business to Clayton, Dubilier & Rice LLC in a deal that values the unit at $1.8 billion.

Ashland Water Technologies makes specialty chemicals for markets including pulp and paper, power generation, mining, energy and food and beverage, generating about $1.7 billion in annual sales. The unit has 31 manufacturing facilities spread across 17 countries on five continents, with pulp and paper accounting for about 67% of 2013 sales.

Covington, Ky.-based Ashland put the water treatment unit on the block last July, following efforts to restructure the business and boost its performance. Ashland said it expects net proceeds of about $1.4 billion from the sale, with the company planning to use most of the funds to repurchase shares.

Ashland chairman and CEO James J. O'Brien in a statement said the water technologies business "has shown tremendous improvement" over the last year, saying "I believe it is well positioned to build on that momentum under Clayton, Dubilier & Rice ownership."

Post-deal Ashland will focus on its core specialty chemicals business. O'Brien said that the divestiture, coupled with the company's internal restructuring, "will help position Ashland for Ebitda margins that rank among the top 25 percent of specialty chemical companies."

CD&R reportedly beat out a joint bid from Blackstone Group LP and Danaher Corp. as well as a separate offer from Rhone Group LLC to win the unit. The firm said that post-deal it expects Ashland exec John Panichella to continue to lead the unit, with one-time NextEra Energy Inc. chairman and CEO Lewis Hay III chairing the independent company's board.

"Ashland Water Technologies has many attractive features, including a very strong competitive position which reflects its global scale, deep set of service capabilities and innovation leadership," CD&R partner George K. Jaquette said. "We look forward to working with the management team to build upon the company's market leadership position."

CD&R said it has obtained committed financing from affiliates of Bank of America Merrill Lynch, Credit Suisse AG, Goldman Sachs & Co., Macquarie Capital, Nomura Securities International Inc. and RBC Capital Markets. The private equity firm said those banks all also provided financial advice, with a Debevoise & Plimpton LLP team of Paul Bird, Michael Diz, David Brittenham, Jonathan Lewis, David Schnabel, counsel Brandon C. Gruner and Stuart Hammer providing legal counsel.

Ashland was advised by Citigroup Inc. along with Susan Webster, Thomas E. Dunn, Lauren Angelilli, Eric W. Hilfers and George E. Zobitz of Cravath, Swaine & Moore LLP along with attorneys at Squire Sanders LLP.

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