Ashland has been in China for 30 years. As early as 1975, Drew Chemical Company, a subsidiary of Ashland Group, entered the Chinese market by signing an agency agreement with China Ocean Shipping Corporation. Since then, Ashland Group's business in China has grown steadily, and it has successively established four wholly-owned subsidiaries, Valvoline (Shanghai) Lubricant Co., Ltd., Ashland (Changzhou) Chemical Co., Ltd., Ashland Polyester ( Kunshan) Co., Ltd., Changzhou Ashland Modern Chemical Co., Ltd., and a joint venture Coors (Shanghai) Lubricant Co., Ltd. have set up sales representative offices in Beijing and Shanghai. Ashland Group has expanded and upgraded its production plants in Changzhou and Kunshan. The project in Changzhou was put into operation in 2005.
In 2008, Ashland Group acquired another well-known chemical company-Hercules for US$3.3 billion. In the following two years, the business units were integrated with Hercules. On June 3, 2011, Ashland Group and International Specialty Chemicals (ISP) announced that Ashland Group agreed to acquire ISP, a privately held company. ISP is an international specialty chemicals manufacturer with innovative functional materials products and technologies. According to the terms of the equity acquisition agreement, Ashland will pay approximately US$3.2 billion, all in cash. From there, ISP's advanced products will expand Ashland's presence in fast-growing markets such as personal care, pharmaceuticals and energy. In the 12 months ended March 31, 2011, ISP's sales reached approximately US$1.6 billion and EBITDA was approximately US$360 million. The acquisition will also cause Ashland Group's per-share price to surge rapidly. ISP is a world-leading supplier of specialty chemicals and performance-enhancing products serving consumer and industrial markets. ISP will use its unique technology to bring high-value water-soluble polymers and other advanced technologies to Ashland's Functional Materials business unit, while also serving Ashland's food and beverage, energy, coatings, Additional additive products are available in the areas of adhesives and water treatment. This acquisition will greatly expand the number of patents and R&D teams of Ashland Group Functional Materials and have a profound impact, proving Ashland Functional Materials' technology and application capabilities in providing unique solutions to customers. .
James J. O'Brien, chairman and chief executive officer of Ashland Corporation, said: "This historic transaction will enable Ashland's personal care and pharmaceutical additives products to achieve higher profits and better quality. Fast growth and shorter cycle times. It will broaden our business in the fast-growing areas of beauty, hair care and oral care, which are segments of the personal care specialty functional products market with global sales of more than $5 billion. A large and rapidly growing component of the economy."
ISP Chairman and CEO Sunil Kumar said: "We are excited to bring ISP and Ashland Group together. Both companies share a mission to provide customers with innovative solutions and technology. mission. We appreciate Ashland's interest in this business and believe this combination will create great opportunities for our customers, key partners and employees."
O'Brien. Added: “We look forward to welcoming ISP’s employees to Ashland. Our business models are complementary and have the same capabilities in formulation, application development and polymerization. We both adhere to fundamental manufacturing and operational processes, resulting in World-class products. Because of the outstanding leadership of our two companies and Ashland's success with previous acquisitions, we are confident that the transition will be successful and we are excited about the opportunities for future innovation and growth." The pro forma invoice for this transaction stipulates that the ISP's revenue for the first 12 months ended March 31, 2011, which was approximately US$7.6 billion, was owned by Ashland, with nearly half of it coming from outside North America. The newly integrated Functional Materials business unit is expected to generate half of Ashland's $1.1 billion in pro forma EBITDA.
We expect that in the second year after the acquisition closes, annual cost savings will reach approximately $50 million by eliminating redundancies and improving production efficiency.
Subject to customary closing conditions and receipt of U.S. and EU regulatory approvals, the transaction is expected to close by the end of September.
The purchase price will be affected by subsequent float adjustments to net working capital after closing and a number of other factors. Subject to customary terms and conditions, the transaction will be funded with a combination of the company's existing cash and financing sponsorship from Citibank, Bank of Nova Scotia, Bank of America Merrill Lynch and American Bankers Association Associates.
According to the terms of the equity acquisition agreement, if financing fails and other transaction terms are met, ISP has the right to terminate the contract and require Ashland to pay a fee of US$413 million.
Merrill Lynch will serve as financial advisor to Ashland, and Cravath, Swaine & Moore LLP will serve as legal advisor. Moelis & Company will serve as financial advisor to ISP, with Sullivan and Cromwell LLP serving as legal advisor.