Ashland Inc. announced Friday it will acquire Wilmington-based specialty chemicals maker Hercules Inc. in a $2.6 billion cash-and-stock deal.
The offer represented a 38percent premium over Hercules' Thursday closing price, but the premium was narrower than Thursday's Dow Chemical Co. deal for Rohm and Haas Co.
The companies value the deal at $3.3 billion, including the assumption of $700 million of Hercules debt. The transaction is expected to close by the end of 2008.
Ashland shares were down $6.48, or 13.7 percent, to $40.93 in afternoon trading Friday. Hercules shares were up $4.18, or 25 percent, to $20.84
The deal was announced the day after Dow Chemical Co. agreed to acquire Rohm and Haas Co. at a steep premium for more than $15 billion in cash, but Buckingham Research Group analyst John Robert said he doesn't think the Hercules acquisition is part of a broader industry consolidation.
“These were two acquirers with substantial cash windfalls that were known to be looking for deals,” Roberts said.
The premium offered by Ashland for Hercules is significantly less than what Dow offered for Rohm and Haas, but analyst David Begleiter of Deutsche Bank noted that Hercules has at least $230 million in asbestos liability and its pension plan is underfunded by $160 million.
Ashland officials told analysts in a conference call Friday that they had carefully studied Hercules' liabilities and concluded that the acquisition would be a positive move.
“The acquisition of Hercules fulfills our objective to create a major global specialty chemicals company,” said Ashland Chairman and Chief Executive Officer James O'Brien.
O'Brien said the deal will increase Ashland's presence in growth markets including China, Eastern Europe and Brazil. The greater scale of the combined companies will enhance the focus on the three core businesses of specialty additives and ingredients, paper and water technologies, and specialty resins, he added.
Ashland manufactures specialty chemicals, distributes chemicals and plastics, and provides automotive lubricants, car-care products and quick-lube services. Hercules is one of the world's leading suppliers of specialty chemicals to the pulp and paper industry.