CORRECTED-UPDATE 1-Ashland investor says halt Valvoline spinoff, sell specialty arm

Wed Jan 20, 2016 3:26pm EST
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(Corrects paragraph 3 to say the multiple at which the entire company trades, not just the specialty chemicals arm. Corrects paragraph 12 that the projected stock price refers to Ashland, not Valvoline.)

By Michael Flaherty

Jan 20 (Reuters) - One of Ashland Inc's largest shareholders is urging the chemical maker to halt plans to spin off its Valvoline business and instead seek a buyer for its specialty chemicals unit, according to a slide presentation obtained by Reuters.

Elmrox Investment Group LLC, which says it owns more than $100 million in Ashland stock, said Valvoline would be more valuable as a stand-alone company and suggested it be structured as a master limited partnership.

As for the specialty chemicals arm, which makes compounds that go into personal care products, pharmaceuticals, and energy industry fluids, Elmrox says the division could be acquired for roughly twice the multiple the entire company currently commands.

Elmrox cited the proposed merger of DuPont and Dow Chemical as an example of industry consolidation.

The hope is for Ashland shareholders to collect some change-in-control premium while the "iron is hot", Don Bilson, head of event-driven research at Gordon Haskett, wrote in a research note.

"That said, we don't see the market for chemical deals to be red hot at the moment," Bilson said in the note.

Last year, Ashland said it would spin off Valvoline, its engine lubricants unit, into a publicly traded company, as it seeks to shed assets that are not part of its core specialty chemicals business.   Continued...