(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.
The spinoff would help mark the final step in Ashland's decade-long shift from an oil refiner to a specialty chemicals maker, the company said in September.
Prior to Elmrox's push for change, which includes suggesting the company grant the investor representation inside its board room, activist Jana Partners had targeted Ashland.
Jana bought a 7.4 percent stake and pushed for changes in the company's structure and better capital returns, a campaign that helped lead to sales of several non-core businesses. Jana sold its stake early last year, according to filings.
Shares of Ashland, based in Covington, Kentucky, fell 1.5 percent to $94.76 on the New York Stock Exchange on Wednesday.
Elmrox says in its presentation that if Valvoline, which makes motor oil and automotive chemicals and also operates retail repair shops, was structured as a master limited partnership and the chemicals business sold, Ashland investors could see total value of more than $250 per share.
Elmrox's founder, Daniel Lawrence, said the firm thinks highly of Ashland CEO William Wulfsohn, according to the Wall Street Journal, which first reported the investor's move. (Additional reporting by Sneha Teresa Johny in Bengaluru; Editing by Sunil Nair and Paul Simao)