Ashland (NYSE:ASH) has agreed to buy privately-held International Specialty Products for $3.2 billion in an all-cash transaction that will expand its position in high-growth markets such as personal care, pharmaceutical and energy.
ISP, which makes specialty chemicals and performance-enhancing products for consumer and industrial markets, booked sales last year of $1.6 billion.
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From the deal, Ashland said it will acquire a range of offerings from water soluble polymers for its functional ingredients business to complementary additives for its food and beverage, energy, coating, adhesives and water treatment segments.
“This defining transaction enables us to significantly expand our market positions in higher margin, higher growth and less cyclical global markets like personal care and pharmaceuticals,” Ashland CEO James O'Brien said in a statement. “In addition, we expect to more than double the size of our highest-margin functional ingredients business.”
Ashland said it expects to realize annual cost savings of about $50 million by the second year following the transaction’s close, which is slated for the end of September following the receipt of U.S. and European Union regulatory approvals and customary closing conditions.
The deal will be financed using cash on hand and committed financing from Citi (NYSE:C), Bank of Nova Scotia, Bank of America (NYSE:BAC) and U.S. Bank National Association.
If Ashland does not meet the transaction terms or acquire all necessary financing, ISP has the right to terminate the agreement and require Ashland to pay a fee of $413 million.