By Lisa Kerner
Charlotte, N.C., July 11 - Ashland Inc. agreed to acquire Hercules Inc. in a stock and cash deal valued at $23.01 per Hercules share or about $3.3 billion including debt.
Under the companies' definitive merger agreement, Hercules shareholders will receive $18.60 per share in cash plus 0.093 of a share of Ashland common stock for each share of Hercules common stock.
The transaction is expected to close by the end of 2008, according to an Ashland news release.
The cash portion of the merger consideration will be funded through a combination of cash on hand and committed debt financing from Bank of America and Scotia Capital, Ashland said.
Ashland will use the cash flows of the combined organization to pay down debt with a goal of attaining investment-grade credit ratings within two to four years after closing the transaction, the news release stated.
The definitive merger agreement includes termination rights for both companies.
Hercules would be required to pay Ashland a fee of $77.5 million under certain circumstances including if Hercules terminates the merger agreement to accept a superior offer. Ashland would be required to pay Hercules a fee in the same amount if the transaction is not completed due to a failure to obtain financing at the time the conditions to the merger have been satisfied.
Ashland said it expects to realize annualized run-rate cost savings of at least $50 million by the third year following the transaction's close.
"The acquisition of Hercules fulfills our objective to become a leading specialty chemicals company," Ashland chairman and chief executive officer James J. O'Brien said in the release.
"It creates a defined core for Ashland composed of three specialty chemical businesses with strong market positions and promising global growth potential: specialty additives and ingredients, paper and water technologies, and specialty resins," added O'Brien.
According to O'Brien, the paper and water businesses of each company will be combined to create one global paper and water technologies business with annual revenue of $2 billion.
Hercules' Aqualon Group president John Panichella and Paul Paul Raymond, president of Hercules' Paper Technologies and Ventures Group, have agreed to join Ashland after the merger's close. The combined company will maintain a significant presence in Wilmington, Del., where Hercules is based.
Citigroup Global Markets Inc. advised Ashland, while Hercules was advised by Credit Suisse Securities (USA) LLC.
Ashland is a diversified, global chemical company based in Covington, Ky.
Hercules manufactures and markets chemical specialties globally for making a variety of products for home, office and industrial markets.
| Acquirer: | Ashland Inc.
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| Target: | Hercules Inc.
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| Announcement date: | July 11
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| Transaction total: | $3.3 billion
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| Price per share: | $18.60 per share in cash plus 0.093 of a share of Ashland common stock
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| Termination fee: | $77.5 million
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| Expected closing: | End of 2008
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| Stock price for acquirer: | NYSE: ASH; $47.41 on July 10
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| Stock price of target: | NYSE: HPC; $16.61 on July 10
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