Cruiser Says Ashland Could Be Worth More Than $125 Per Share

(Bloomberg) -- Cruiser Capital Advisors is calling on Ashland Global Holdings Inc. to step up efforts to improve its performance, arguing the chemical company could be worth more than $125 a share if were to fix its operational issues.

Ashland should cut costs more aggressively and improve its margins to help eliminate the discount it trades at to peers, the New York-based investment firm said in a letter to the company reviewed by Bloomberg.

"We are concerned that rather than execute on the substantial cost savings, revenue growth and margin expansion opportunities that we believe are necessary to maximize Ashland’s potential, the board will take the easiest path available and sell Ashland at a sub-optimal price," Cruiser said in the letter dated Nov. 20.

An Ashland statement responding to Cruiser didn’t address any potential deals. “Ashland has a long history of taking decisive action to improve its competitive position and create significant value for stockholders,” the company said in the emailed statement.

Higher adjusted earnings in the fiscal year ended Sept. 30 show the company is making “good progress” toward financial commitments it made last year, Ashland said. Shareholder returns have outpaced the S&P Midcap 400 Index since the separation of Valvoline last May, as well as over the past 1-year and 5-year periods, Ashland said.

“We expect continued improvement in fiscal 2019 and beyond” as the company focuses on increasing margins and benefits from becoming a pure-play specialty chemical company, according to the statement.

Ashland has been on the radar of at least one rival. Croda International Plc made an unsuccessful attempt to buy the Covington, Kentucky-based company, people familiar with the matter said in February. The companies couldn’t agree on a price but Croda remains interested in a deal, the people said at the time.

Ashland fell 0.2 percent to $80.17 at 12:44 p.m. in New York, giving the company a market value of about $5 billion.

Board Nominees

Cruiser, which owns a 2.5 percent stake in the company, said it was concerned that Ashland hasn’t met with the firm’s four board nominees. Its candidates have purchased more shares in Ashland this year than its entire board and management team combined, Cruiser said in the letter. It had recommended that Ashland’s board meet with two of its candidates -- William Joyce and Allen Spizzo -- more than five months before they were nominated.

Ashland said it “regularly” refreshes and strengthens its board. Two nominees in the past five years were recommended by shareholders, the company said. Five directors joined the board within the past three years and four have joined since the start of 2017.

Ashland has transformed itself in the last 15 years from an oil refiner and chemicals distributor to a producer of solvents, composites and other products for industries such as construction, personal care and pharmaceuticals. Ashland agreed to sell a resins business this month for $1.1 billion to Ineos, as Chief Executive Officer William Wulfsohn seeks to focus on specialty chemicals.

A well-informed board perspective is particularly necessary now with Ashland poised to receive about $1 billion proceeds from its divestitures, Cruiser said, adding that execution issues are behind its shares trading at a discount to peers.

Ashland appointed former Sealed Air Corp. executive Jerome Peribere to its board in January after he was recommended by Cruiser. The firm said more change is needed.

"Great opportunity exists at the company and the proposed nominees can help elevate Ashland to achieve more value for its shareholders," Cruiser said.

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