2008/7/11 Ashland

Ashland to acquire Hercules
　　$3.3 billion transaction creates major, global specialty chemicals company

Ashland Inc. and Hercules Inc. today announced that they have entered into a definitive merger agreement under which Ashland would acquire all of the outstanding shares of Hercules for $18.60 per share in cash and 0.093 of a share of Ashland common stock for each share of Hercules common stock. The total transaction value is approximately $3.3 billion, or $23.01 per Hercules share based on Ashland’s July 10 closing stock price and including $0.7 billion of net assumed debt. The transaction, which would create a major, global specialty chemicals company, is expected to close by the end of calendar 2008.

With sales in more than 100 countries, Ashland is a manufacturer of specialty chemicals, a leading distributor of chemicals and plastics, and a provider of automotive lubricants, car-care products and quick-lube services. Hercules is a leader in specialty additives and ingredients that modify the physical properties of water-based systems and is one of the world’s leading suppliers of specialty chemicals to the pulp and paper industry.

Ashland Chairman and Chief Executive Officer James J. O’Brien said, “The acquisition of Hercules fulfills our objective to become a leading specialty chemicals company. It creates a defined core for Ashland composed of three specialty chemical businesses with strong market positions and promising global growth potential: specialty additives and ingredients, paper and water technologies, and specialty resins. In addition, we expect our financial profile to be enhanced significantly through reduced earnings volatility, improved profitability and stronger cash flow generation.”

　

In specialty additives and ingredients, Hercules' Aqualon business is one of the most recognized and admired specialty chemical brands in the world and brings Ashland a significant market position in rheology modifiers, which alter the physical properties of water-based systems. These additives are used across a wide range of industries to make everything from adhesives and paints to foods, pharmaceuticals and personal care products. Nearly all of Aqualon’s additive products are water soluble polymers derived from renewable materials. The combined company generates, on a pro forma basis, approximately one-third of EBITDA from bio-based or renewable chemistries.

“We will combine the paper and water businesses of each company to create one global paper and water technologies business with annual revenue of $2 billion,” said O’Brien. “In particular, Hercules’ leadership position in pulp and paper technologies bolsters our participation in one of the world’s largest water treatment markets. The combined businesses will provide the scale to leverage opportunities in other key water treatment markets including municipal, industrial and marine.

“The third business within our new core - specialty resins - is one where Ashland has long enjoyed a strong reputation for innovation and service. A broader international footprint will offer the specialty resins business expanded global growth opportunities in key building and construction markets, including infrastructure and wind energy. In addition, our Distribution and Valvoline businesses provide complementary capabilities and share similar markets with the specialty chemical businesses,” said O’Brien.

　

Ashland Products:

Ashland Distribution is a leading distributor of chemicals, plastics, composite materials and environmental services in North America, and thermoplastics in Europe. Our people, processes, systems, distribution network and strategic relationships with raw material producers are focused on one thing - satisfying your needs and making sure that every order is on time, accurate and complete.

Ashland Performance Materials
We are a worldwide manufacturer and supplier of specialty chemicals and customized services to the building and construction, packaging and converting, transportation, marine and metal casting industries. We are a technology leader in metal casting consumables and design services; unsaturated polyester and vinyl ester resins and gelcoats; and high-performance adhesives and specialty resins.

Ashland Water Technologies
Our Drew Industrial and Environmental and Process Solutions business units supply chemical and non-chemical water treatment solutions for industrial, commercial and institutional facilities. Our Drew Marine business provides boiler and cooling water treatments, fuel treatments, welding, refrigeration and sealing products, and fire, safety and rescue products for the merchant marine industry.

Valvoline
Serving more than 100 countries around the globe, Valvoline is a leading marketer, distributor and producer of quality branded automotive and industrial products and services. Products include automotive lubricants including MaxLife, the first motor oil specifically formulated for higher-mileage vehicles; transmission fluids; gear oils; hydraulic lubricants; automotive chemicals; specialty products; greases, and cooling system products.

Hercules

Founded in 1912, Hercules Incorporated manufactures and markets chemical specialties globally used in making a variety of products for home, office, and industrial markets.

Our portfolio of businesses consists of two major operating segments: Aqualon Group and the Paper Technologies and Ventures Group.

Aqualon Group

Aqualon is a world leader in products that modify the physical properties of aqueous, or water-based, systems and the world's only pale wood rosin derivatives producer. Most of Aqualon's products are derived from renewable natural raw materials.

The Aqualon Group focuses its resources on three key growth markets:

Paper Technologies and Ventures Group

The Paper Technologies portion of this group is dedicated to providing superior products and services for the paper industry.

The Ventures portion is focused on expanding our businesses in four markets:

1950s
Expansion and Metamorphosis
・ Hercules finds new and expanding markets in petrochemicals.
・ Military and civilian space programs provide new growth opportunities for Hercules' chemical propulsion products.

1960s
Managing New Constraints
・ Hercules expands globally.
・ Large-scale investments increase capacity for making petrochemical commodities and fabricated materials;
　　Hercules becomes the leading producer of dimethyl terephthalate (DMT)
　　and polypropylene for resins, fibers and film.

1970s
Reorientation
・ Hercules moves away from petrochemical commodities toward specialty chemicals and aerospace products.
・ Environmental movement brings not only compliance challenges, but also new opportunities to develop products
　and technologies for solid waste treatment.

Prior to November 1, 1983, Hercules was a global manufacturer of polypropylene. Between 1981 and November 1, 1983, Hercules sold over $1 billion worth of polypropylene, and this amount consisted of 15% of plaintiff's net sales. Hercules, however, did not maintain the technology to economically produce polypropylene and, with the increase of oil costs, plaintiff decided to reduce its reliance on this product.

On November 1, 1983, plaintiff and an Italian corporation, Montedison, entered into a joint-venture agreement. The agreement created the corporation, Himont.
On February 12, 1987, Himont offered 22.6% of its common stock to the public in its initial public offering. Following this public offering, Hercules' and Montedison's ownership shares of Himont fell to 38.7% each. In September 1987, Montedison threatened to take over Hercules if it did not sell its remaining shares in Himont. Montedison also agreed to pay a premium for the stock owned by Hercules. Hercules then agreed to sell its shares, and in 1987 Montedison paid Hercules $1,487,500,000, or $59.50 per share, resulting in a net capital gain to Hercules of $1,338,501,966.