Ashland in Buyback Deal with Citi


The specialty chemicals maker, Ashland Inc. (ASH), has entered into a $150 million accelerated share repurchase agreement (ASR) with Citibank, N.A., a subsidiary of Citigroup, Inc. (C).

Under the agreement, Ashland has agreed to buyback a total of $150 million of its common stock from Citibank, with immediate delivery of roughly 1.3 million shares depending on current market prices.

The new ASR is a part of a previously declared $600 million share repurchase program. The move adopted by Ashland testifies to its commitment to boost shareholders’ value.

The total number of shares to be eventually repurchased by Ashland under the ASR will depend on its volume-weighted average stock price during the term of the ASR, less an agreed discount. The term of the ASR is expected to be between one and three months and the actual number of shares purchased will be determined at the ASR’s completion. The funds for ASR will be provided by cash on hand.

Ashland makes nickel and cobalt-based alloys in sheet coil and plate forms. Its Consumer Markets segment markets Valvoline, the world’s first lubricating oil. It also operates the Valvoline Instant Oil Change, the nation’s second-largest franchised quick-lube chain. Ashland offers specialty chemicals to more than 100 countries.

Last month, Ashland, reported second-quarter fiscal 2013 (ended Mar 31, 2013) adjusted earnings (excluding one-time items) from continuing operation of $1.78 per share, outshining the Zacks Consensus Estimate of $1.56.

Profits from continuing operations, as reported, fell roughly 39% year over year to $55 million or 68 cents a share. Revenues fell 5% year over year to $1,974 million, missing the Zacks Consensus Estimate of $2,057 million. Ashland was challenged by weakness prevailing in a number of key regions, especially Europe. It witnessed lower sales across each of its business segments in the quarter on lower demand.
Ashland currently carries a short-term Zacks Rank #4 (Sell).

Other companies in the chemical industry that are worth considering include Shin-Etsu Chemical Co., Ltd. (SHECY) and Methanex Corp. (MEOH). Both retain a Zacks Rank #1 (Strong Buy)

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