Filed by Ashland Inc. pursuant to Rules 165 and 425 promulgated
under the Securities Act of 1933, as amended, and deemed
filed pursuant to Rule 14a-12 promulgated under the
Securities Exchange Act of 1934, as amended.
Subject Company: Ashland Inc.
Commission File No.: 001-02918
FOR FURTHER INFORMATION:
Media Relations: Investor Relations:
Alan Chapple Bill Henderson
(770) 392-5352 (859) 815-4454
alchapple@ashland.com wehenderson@ashland.com
FOR IMMEDIATE RELEASE
MARCH 19, 2004
ASHLAND INC. AGREES TO TRANSFER INTEREST IN MAP TO
MARATHON OIL CORPORATION IN TAX-FREE TRANSACTION
COMPANY PROVIDES UPDATE ON CORE BUSINESSES
Covington, Ky. - Ashland Inc. (NYSE: ASH) today announced that it has signed
an agreement under which Ashland will transfer its 38 percent interest in
Marathon Ashland Petroleum LLC (MAP) and two other businesses to Marathon Oil
Corporation in a transaction structured to be tax free and valued at
approximately $3.0 billion. The two other businesses are Ashland's maleic
anhydride business and 61 Valvoline Instant Oil Change (VIOC) centers in
Michigan and northwest Ohio, which are valued at $94 million.
Under the terms of the agreement, Ashland's shareholders would receive
Marathon common stock with a value of $315 million (or approximately $4.50 per
Ashland share based on the number of shares currently outstanding). Ashland
would receive cash and MAP accounts receivable totaling $2.7 billion. MAP will
not make quarterly cash distributions to Ashland and Marathon between now and
the closing of the transaction. As a result, the final amount received by
Ashland would be increased
by an amount equal to 38 percent of the cash accumulated from operations
during the period prior to closing. Ashland would use a substantial portion of
the transaction proceeds to retire all or most of the company's outstanding
debt and certain other financial obligations. After payment of these
obligations, Ashland would have a material net cash position.
The transaction is subject to, among other things, approval by Ashland's
shareholders, customary antitrust review, consent from public debt holders and
receipt of a favorable private letter ruling from the Internal Revenue Service
with respect to the tax treatment of the transaction. There is meaningful risk
that the transaction will not receive the favorable ruling from the IRS, in
which case the transaction would not proceed. However, Ashland believes it is
more likely than not that this transaction will receive a favorable ruling. If
these conditions are met, the transaction is expected to close by the end of
the 2004 calendar year.
"This transaction represents the best opportunity for Ashland and its
shareholders to capture the value that has been created through this joint
venture," said James J. O'Brien, Ashland's chairman and chief executive
officer. "While we have been pleased with both the performance of the joint
venture and our relationship with Marathon, the transfer of our interest in
MAP to Marathon is an important step in achieving our strategic objectives."
In connection with the transaction, Credit Suisse First Boston LLC acted
as financial advisor, and Cravath, Swaine & Moore LLP acted as legal counsel
to Ashland.
BUSINESS UPDATE
The improved performance of Ashland's wholly-owned divisions in the first
quarter continued into the second quarter of fiscal 2004.
Ashland's Transportation Construction sector (Ashland Paving And
Construction, Inc., or "APAC(R)") anticipates improved performance for the
quarter ending March 2004, although its results for the quarter reflect
seasonal winter weakness. APAC is expecting a loss in the range of $30 million
to $40 million compared to the $57 million loss for the March 2003 quarter.
Going forward, APAC will focus on improving its performance in the near term
and in the longer-term on major project capabilities and expanding both
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within and adjacent to its current geographic markets. Ashland believes that
APAC is well-positioned to benefit from the expanded highways spending
legislation that is currently under Congressional review.
Ashland's Chemicals sector includes Ashland Distribution, Ashland
Specialty Chemical (thermoset resins and water technologies businesses) and
Valvoline. These divisions remain focused on creating innovative products and
solutions, maintaining a low cost structure and expanding their markets. The
Chemicals sector continues to perform well and anticipates operating income
for the March quarter in the range of $50 million to $55 million, compared to
$30 million in the March quarter of last year.
Each division within the Chemicals sector expects increased operating
income for the March quarter, with the largest improvements projected by
Ashland Distribution and Ashland Specialty Chemical. Ashland Distribution's
growth has been driven by consistent sales volume increases. Ashland Specialty
Chemical's growth is due in part to new product introductions, such as new
additions to the MAXGUARD(R) marble clear gel coat and POLARIS(R) resin lines.
These products enable Ashland to work proactively with manufacturers to
optimize their entire cast marble, onyx or solid surface fabrication
processes. Valvoline's momentum is built on its successful premium products
strategy, and the division continues to introduce new, customer-focused
products and services, contributing to its consistent top-line growth. For
example, VIOC - which owns and franchises more than 740 stores nationwide -
recently launched a fleet management program that incorporates both VIOC and
other vendors' maintenance records into a comprehensive service history.
"Much of the progress we have made in the past year is due to the hard
work and dedication of our employees," said Mr. O'Brien. "I would like to
thank them for their continuing effort as we focus on the execution of our
strategies.
"Our disciplined investment approach will focus on expanding and
strengthening our core businesses through organic growth," continued Mr.
O'Brien. "We have already made significant progress in improving our core
operations, and I am confident that Ashland is well-positioned to create
long-term value in our wholly owned divisions and to achieve our goal of
top-quartile performance."
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ANALYST/INVESTOR TELECONFERENCE INFORMATION
Today at 10:00 a.m. Eastern Time, Ashland will provide a live audio
webcast of its teleconference with securities analysts. The call will be
hosted by William E. Henderson, III, director of investor relations.
Participants will include James J. O'Brien, chairman and chief executive
officer, and J. Marvin Quin, senior vice president and chief financial
officer.
The webcast may be accessed online at www.ashland.com. A limited number
of telephone lines also will be available by dialing (800) 901-5231 from
inside the U.S. or (617) 786-2961 if dialing from outside the U.S., and
entering passcode 82740514.
The webcast replay and an archived version of the presentation will be
available online at www.ashland.com/investors. A telephone audio replay will
be available through March 26, 2004 by dialing (888) 286-8010 from inside the
U.S. or (617) 801-6888 from outside the U.S. (passcode 46893461).
ABOUT ASHLAND
Ashland (NYSE: ASH) is a Fortune 500 transportation construction,
chemicals and petroleum company providing products, services and customer
solutions throughout the world. To learn more about Ashland, visit
www.ashland.com.
FORWARD-LOOKING STATEMENTS
This news release contains forward-looking statements, within the meaning
of Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. These statements include those that refer to Ashland's
operating performance and expectations about this transaction, including those
statements that refer to the expected benefits of the transaction to Ashland's
shareholders. Although Ashland believes its expectations are based on
reasonable assumptions, it cannot assure the expectations reflected herein
will be achieved. These forward-looking statements are based upon internal
forecasts and analyses of current and future market conditions and trends,
management plans and strategies, weather, operating efficiencies and economic
conditions, such as prices, supply and demand, cost of raw materials, and
legal proceedings and claims (including environmental and asbestos matters)
and are subject to a number of risks, uncertainties, and assumptions that
could cause actual results to differ materially from those we describe in the
forward-looking statements. The risks, uncertainties, and assumptions include
the possibility that Ashland will be unable to fully realize the benefits
anticipated from the transaction; the possibility of failing to receive a
favorable ruling from the Internal Revenue Service; the possibility that
Ashland fails to obtain the approval of its shareholders; the possibility that
the transaction may not close or that Ashland may be required to modify some
aspect of the transaction to obtain regulatory approvals; and other risks that
are described from time to time in the Securities and Exchange Commission
reports of Ashland. Other factors and risks affecting Ashland are contained in
Ashland's Form 10-K for the fiscal year ended Sept. 30, 2003, filed with the
Securities and Exchange Commission (SEC) and available in Ashland's Investor
Relations website at www.Ashland.com/investors or the SEC's website at
www.sec.gov. Ashland undertakes no obligation to subsequently update or revise
the forward-looking statements made in this news release to reflect events or
circumstances after the date of this release.
ADDITIONAL INFORMATION ABOUT THIS TRANSACTION
Investors and security holders are urged to read the proxy
statement/prospectus regarding the proposed transaction when it becomes
available because it will contain important information. The proxy
statement/prospectus will be filed with the SEC by Ashland, and security
holders may obtain a free copy of the proxy statement/prospectus when it
becomes available, and other documents filed with the SEC by Ashland, at the
SEC's website at www.sec.gov. The proxy statement/prospectus, and other
documents filed with the SEC by Ashland, may also be obtained for free in the
SEC filings section on Ashland's Investor Relations website at
www.Ashland.com/investors, or by directing a request to Ashland at 50 E.
RiverCenter Blvd., Covington, KY 41012. The respective directors and executive
officers of Ashland and other persons may be deemed to be participants in the
solicitation of proxies in respect of the proposed transaction. Information
regarding Ashland's directors and executive officers is available in its
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proxy statement filed with the SEC by Ashland on December 8, 2003. Investors
may obtain information regarding the interests of participants in the
solicitation of proxies in connection with the transaction referenced in the
foregoing information by reading the proxy statement/prospectus when it
becomes available.
APPENDIX:
ASHLAND INC. TO TRANSFER INTEREST IN MAP TO MARATHON OIL CORPORATION
TRANSACTION STEPS
The transaction would be accomplished through a series of steps, which
would all occur on the day of closing and in the following order:
1. MAP Partial Redemption. MAP would redeem a portion of Ashland's 38%
interest in MAP for a redemption price likely to be in the range of $900
million*, consisting of cash and MAP accounts receivable. Because MAP
will not make quarterly cash distributions prior to the closing, such
redemption price would increase by an amount equal to 38% of the cash
accumulated from MAP's operations prior to closing.
2. Maleic/VIOC Contribution. Ashland would contribute the maleic anhydride
business and 61 Valvoline Instant Oil Change centers to a newly formed
subsidiary of Ashland ("HoldCo").
3. MAP Contribution. Ashland would contribute to HoldCo its remaining
interest in MAP.
4. The Reorganization Merger. As a preliminary step to the final formation
of New Ashland Inc., Ashland would be merged with and into New Ashland
LLC, which would be the surviving business entity of that merger and a
subsidiary of HoldCo.
o By virtue of this Reorganization Merger, each share of Ashland
common stock would be converted into and represent one share of
HoldCo common stock.
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5. HoldCo Borrowing and Capital Contribution. Marathon would arrange for a
borrowing by HoldCo of $1.8 billion*, which would be expressly
non-recourse to New Ashland LLC and would otherwise be made on terms and
conditions reasonably acceptable to Ashland. HoldCo would contribute to
New Ashland LLC the proceeds of the borrowing.
o The amount of the HoldCo borrowing would depend on the amount
of Ashland financings outstanding at closing that the Internal
Revenue Service would permit Ashland to pay down with the
proceeds of the borrowing. If the amount of this borrowing is
increased (or decreased), the amount of the partial redemption
would be decreased (or increased) accordingly.
6. The Conversion Merger. New Ashland LLC would be merged with and into New
Ashland Inc., which would survive the merger. New Ashland Inc. would be a
wholly owned subsidiary of HoldCo.
7. Separation and Merger. HoldCo would be merged into a newly formed
subsidiary of Marathon, which would survive the merger.
o By virtue of the merger of HoldCo and the Marathon subsidiary,
the former Ashland shareholders (now holding HoldCo shares)
would have the right to receive, for each share of HoldCo
common stock, (1) one share of New Ashland Inc. common stock
and (2) a pro rata amount of shares of Marathon common stock
with a total value of $315 million (based on a 20-trading day
averaging period preceding the closing).
o For tax purposes, this merger will be treated as a spin-off of
New Ashland to shareholders followed by the merger of HoldCo
into the Marathon subsidiary.
* Note - The separate amounts received from MAP and HoldCo could vary from
these stated amounts, but in any event, the combination would equal
approximately $2.7 billion.
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TAX ISSUES
The receipt of the following favorable rulings from the IRS is a condition to
closing:
1. The form of the transaction will be respected as a redemption, followed
by a tax-free spin-off and merger.
2. The assumption of HoldCo borrowing by Marathon will not be taxable to New
Ashland.
3. Either New Ashland or Marathon will be entitled to tax deductions for
future payments of Ashland's liabilities associated with discontinued
business operations, including asbestos, environmental, post-retirement
benefits, and other items.
4. The tax basis in New Ashland will not be reduced by the assumption of
liabilities associated with discontinued business operations in a way
that would cause additional taxable Section 355(e) gain to be recognized
by Ashland.*
There are other tax issues on which the transaction would proceed on the basis
of opinions from outside tax counsel, Cravath, Swaine & Moore LLP.
* Note - Although Ashland expects the transaction to be tax free to Ashland
and its shareholders, a tax under Internal Revenue Code Section 355(e)
would be imposed on Ashland if the market value of New Ashland at closing
exceeds the tax basis in New Ashland. That tax basis will change between
the date of signing and the date of closing based on a number of factors,
including results from operations of Ashland's wholly owned divisions and
the accumulated amount of foregone MAP distributions. Based on current
estimates, Ashland would begin paying taxes to the extent the Ashland stock
price at closing exceeds $55.50 based on the number of Ashland shares
currently outstanding. This $55.50 includes $4.50 in value for the Marathon
stock that would be issued to Ashland's shareholders. Any taxes paid would
likely be modest compared to the size of the transaction.
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