By Svea Herbst-Bayliss
NEW YORK, June 9 (Reuters) - Activist Ancora Alternatives has built a significant stake in Ashland Inc and wants the U.S. specialty chemicals company to sell itself, arguing that a transaction could boost its share price by at least 30%, according to a presentation reviewed by Reuters.
The Cleveland-headquartered hedge fund said it is ready to launch a proxy fight at the Wilmington, Delaware-based company if there is not tangible progress toward reaching a deal by the time the window
to nominate directors opens in September.
Ancora began building its stake when the stock price dropped in April after Ashland, whose customers include L'Oreal, Estee Lauder, and Pfizer, reported disappointing fiscal second-quarter earnings. Net income was lower and earnings per share missed Wall Street's forecasts.
Since hitting a high in December 2022, Ashland's stock price has tumbled roughly 50% and now trades near $57.50 as investors punish the company by valuing the whole at less than its standalone business segments would be valued, Ancora said. The company currently has a market value of $2.7 billion.
But a sales process could help push the stock much higher, Ancora forecast, saying the price could rise to at least $76 a share, marking a 31% gain from its current level.
"A sale is the best path to realizing Ashland's intrinsic value in the face of the company's significant trading discount and near-term growth and execution issues," the presentation said. "Ashland is an attractive asset to a deep pool of strategics and financial sponsors alike."
A representative for Ashland was not immediately available for comment.
STANDARD INDUSTRIES HOLDS NEARLY 10% STAKE
Privately held global industrial conglomerate Standard Industries currently ranks as Ashland's biggest investor, with a stake of nearly 10%. Industry analysts have speculated it might be among a group of potential buyers, especially since it has experience with these kinds of takeovers after it bought chemical giant W.R. Grace in 2021.
A representative for Standard Investments, the related investment platform of Standard Industries, declined to comment.
By publicly calling on Ashland to sell, Ancora said it could act as a catalyst and give "the full field of buyers cover to come forward" while also giving management and the board a forceful nudge to move ahead.
ANCORA UNVEILS CAMPAIGN AT ACTIVIST CONFERENCE
Ancora, which cemented its reputation as a successful activist with more than two dozen campaigns in the last six years at companies including railroad Norfolk Southern and retailer Kohls, is unveiling its Ashland campaign at the Wolfe Research Activist Conference on Tuesday.
As the pace of mergers and acquisitions has picked up this year, a number of activist investors have become more vocal in pushing management to sell certain businesses or even the entire company, heaping new pressure on boards and management teams.
While praising Ashland's key products and loyal list of customers, Ancora also signaled it is ready to turn up the heat.
"If constructive dialogue with the board and management does not lead to a near-term resolution, then the company’s upcoming nominating window provides an opportunity to add fresh leadership to the board and ensure proper fiduciary oversight is exercised," the presentation said. Ancora has a list of potential director nominees who know the company well and would be ready to run for seats in a proxy fight.
Ancora has attributed some of the company's lackluster performance to Ashland CEO Guillermo Novo, who was appointed to the top job in 2019 with a mandate to transform the company into a pure-play specialty chemicals company by selling noncore businesses and cutting costs.
Despite some improvements, Ancora notes that the stock price has dropped 24% during Novo's tenure. The hedge fund stopped short of calling for Novo's ouster but left little doubt that time has run out for management to deliver and that it wants to see stronger actions now, the presentation shows.
(Reporting by Svea Herbst-Bayliss in New York; Editing by Matthew Lewis)
