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Ashland Inc. Sells Off Highway Construction Division for $1.3B

Mon August 28, 2006 - National Edition
Bruce Schreiner - ASSOCIATED PRESS

LOUISVILLE, KY (AP) Ashland Inc. said Aug. 21 it has agreed to sell its highway construction division to Oldcastle Materials Inc. for $1.3 billion, allowing Ashland to focus on its core chemical operations.

The sale of Ashland Paving And Construction (APAC) 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, KY-based Ashland. It continues a redirection for Ashland, which last year sold its minority stake in a petroleum refining and marketing company.

After the APAC deal was announced, shares of Ashland fell $2.68, or just more than 4 percent, to $63.67 in late-morning trading Aug. 21 on the New York Stock Exchange.

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 approximately 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 approximately 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.”

The sale will end Ashland’s 40-year run in the highway construction business and continues a transformation that narrows the company’s focus.

Last year Ashland sold its 38 percent stake in Marathon Ashland Petroleum to longtime partner Marathon Oil Corp. in a cash and stock transaction valued at about $3.7 billion. Earlier this year, Ashland purchased a German company’s Stockhausen water treatment business.

“I’m sure it seems odd that in order to grow larger, we have made ourselves smaller yet again,” O’Brien said of the APAC deal. “Yet, this brings us to our vision of being a diversified, global chemical company.”

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