Ashland Global Holdings Inc. (ASH) revealed that its wholly-owned subsidiary, Ashland LLC, has agreed to sell its performance adhesives business to Arkema for $1.65 billion. The deal forms part of the company’s strategic initiative to focus on its core additive and ingredients business.
Shares of the U.S.-based multinational chemical company have gained 18.4% over the past year. (See Ashland stock charts on TipRanks)
Notably, the deal price implies a valuation premium of 20 times EBITDA of $82 million for the performance adhesives business for the last twelve months ended June 30, 2021.
Upon completion of the deal, Ashland plans to focus on its core additive and ingredients business and strengthen its leadership positions in life sciences, personal care, and coatings markets.
Markedly, Ashland plans to utilize the net sale proceeds of $1.2 to $1.3 billion to make incremental investments in its core businesses, stabilize its balance sheet, and reward shareholders.
Ashland CEO Guillermo Novo commented, “Our experience and innovation capabilities, together with a more ESG-aligned portfolio will provide exciting opportunities to create value for all of our stakeholders, especially our customers, employees and shareholders.”
Novo further added, “As we execute our strategy to expand Ashland’s additive and ingredients leadership position, we will maintain capital allocation discipline and focus on our goals of driving profitable growth, margin expansion and improved free cash flow conversion.”
Subject to certain mandatory approvals, the deal is expected to close by the end of the calendar year.
The company also said that it will host its Investor Day in the coming months to highlight its key business strategies, growth initiatives, and expectations for its long-term performance.
J.P. Morgan analyst Jeffrey Zekauskas recently upgraded Ashland from Sell to Hold with a price target of $90 (3.5% upside potential).
Consensus among analysts is a Moderate Buy based on 2 Buys and 1 Hold. The average Ashland price target of $102.67 implies 18.1% upside potential to current levels.
TipRanks data shows that financial blogger opinions are 100% Bullish on ASH compared to a sector average of 69%.
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