Professional Documents
Culture Documents
CHALLENGE U BY FACTSET
BROUGHT TO YO
CHALLENGE U BY FACTSET
BROUGHT TO YO
Daniel W. Lawrence
Elmrox Investment Group
Daniel W. Lawrence is Managing Partner and Founder of Elmrox Investment Group (EIG). EIG is an investment partnership focused on capital
preservation and superior risk-adjusted returns that looks for highly idiosyncratic, asymmetric opportunities using a concentrated approach
over a multi-year horizon. Prior to founding Elmrox Investment Group in 2013, Mr. Lawrence was a Managing Director and co-founder of
Talara Capital Management. Previously, Mr. Lawrence was a Senior Analyst at Citadel Investment Group. Mr. Lawrence began his career as an
investment banking analyst and equity derivatives analyst for Merrill Lynch & Co. Mr. Lawrence is also Founder and Principal Owner of Elmrox
Media LLC, a global content firm targeting 18 to 34 year olds. In addition, Mr. Lawrence has served on the Board of Directors of SUS since
2009. Mr. Lawrence earned a B.S. in Commerce from the McIntire School of Commerce at the University of Virginia. He has since been a guest
finance lecturer at the University and participates in UVa?s Galant Center for Entrepreneurship.
David Swartz
Pacific West Land, LLC
David Swartz is a financial analyst at Pacific West Land, LLC. Founded in 1981, PWL is a Seattle-based real estate investment firm with more
than $100 million in assets under management. David Swartz assists PWL CEO Bruce Galloway with equity investments. David Swartz has
previously worked as an equity analyst and fund manager for three hedge funds. He has a B.A. in economics from U.C. Berkeley and an M.A. in
economics from Yale University.
www.ValueInvestingChallenge.com
CHALLENGE U BY FACTSET
BROUGHT TO YO
Ticker: ASH:US
Recommendation: Long
Situation: Value
www.ValueInvestingChallenge.com
Elmrox
Investment
Group
Ashland
Inc
”With
good
chemistry,
great
things
(shareholder
returns)
happen”
July
2013
Daniel
W.
Lawrence
©
2013
Elmrox
Investment
Group
LLC.
All
rights
reserved
Disclaimer
The
analyses
and
conclusions
of
Elmrox
Investment
Group
LLC
(”Elmrox”)
contained
in
this
presentation
are
based
on
publicly
available
information.
Elmrox
recognizes
that
there
may
be
conMidential
information
in
the
possession
of
the
companies
discussed
in
the
presentation
that
could
lead
these
companies
to
disagree
with
Elmrox’s
conclusions.
This
presentation
is
for
general
informational
purposes
only,
is
not
complete
and
does
not
constitute
an
agreement,
offer,
a
solicitation
of
an
offer,
or
any
advice
or
recommendation
to
enter
into
or
conclude
any
transaction
or
conMirmation
thereof
(whether
on
the
terms
shown
herein
or
otherwise).
This
presentation
should
not
be
construed
as
legal,
tax,
investment,
Minancial
or
other
advice.
It
does
not
have
regard
to
the
speciMic
investment
objective,
Minancial
situation,
suitability,
or
the
particular
need
of
any
speciMic
person
who
may
receive
this
presentation,
and
should
not
be
taken
as
advice
on
the
merits
of
any
investment
decision.
The
views
expressed
in
this
presentation
represent
the
opinions
of
Elmrox,
and
are
based
on
publicly
available
information
with
respect
to
Ashland
Inc.
(the
"Issuer")
and
the
other
companies
referred
to
herein.
Certain
Minancial
information
and
data
used
herein
have
been
derived
or
obtained
from
Milings
made
with
the
Securities
and
Exchange
Commission
("SEC")
or
other
regulatory
authorities
and
from
other
third
party
reports.
The
analyses
provided
may
include
certain
statements,
estimates
and
projections
prepared
with
respect
to,
among
other
things,
the
historical
and
anticipated
operating
performance
of
the
companies,
access
to
capital
markets
and
the
values
of
assets
and
liabilities.
Such
statements,
estimates,
and
projections
reMlect
various
assumptions
by
Elmrox
concerning
anticipated
results
that
are
inherently
subject
to
signiMicant
economic,
competitive,
and
other
uncertainties
and
contingencies
and
have
been
included
solely
for
illustrative
purposes.
No
representations,
express
or
implied,
are
made
as
to
the
accuracy
or
completeness
of
such
statements,
estimates
or
projections
or
with
respect
to
any
other
materials
herein.
Actual
results
may
vary
materially
from
the
estimates
and
projected
results
contained
herein.
Accordingly,
no
party
should
purchase
or
sell
securities
on
the
basis
of
the
information
contained
in
this
presentation.
Elmrox
expressly
disclaims
liability
on
account
of
any
party’s
reliance
on
the
information
contained
herein
with
respect
to
any
such
purchases
or
sales.
Elmrox
has
not
sought
or
obtained
consent
from
any
third
party
to
use
any
statements
or
information
indicated
herein
as
having
been
obtained
or
derived
from
statements
made
or
published
by
third
parties.
Any
such
statements
or
information
should
not
be
viewed
as
indicating
the
support
of
such
third
party
for
the
views
expressed
herein.
Elmrox
does
not
endorse
third-‐party
estimates
or
research
which
are
used
in
this
presentation
solely
for
illustrative
purposes.
No
warranty
is
made
that
data
or
information,
whether
derived
or
obtained
from
Milings
made
with
the
SEC
or
any
other
regulatory
agency
or
from
any
third
party,
are
accurate.
Elmrox
hereby
disclaims
any
duty
to
provide
any
updates
or
changes
to
the
analyses
contained
here.
Neither
Elmrox
nor
any
of
its
afMiliates
shall
be
responsible
or
have
any
liability
for
any
misinformation
contained
in
any
third
party,
SEC
or
other
regulatory
Miling
or
third
party
report.
There
is
no
assurance
or
guarantee
with
respect
to
the
prices
at
which
any
securities
of
the
Issuer
will
trade,
and
such
securities
may
not
trade
at
prices
that
may
be
implied
herein.
The
estimates,
projections,
pro
forma
information
and
potential
impact
of
the
opportunities
identiMied
by
Elmrox
herein
are
based
on
assumptions
that
Elmrox
believes
to
be
reasonable
as
of
the
date
of
this
presentation,
but
there
can
be
no
assurance
or
guarantee
that
actual
results
or
performance
of
the
Issuer
will
not
differ,
and
such
differences
may
be
material.
This
presentation
does
not
recommend
the
purchase
or
sale
of
any
security.
Elmrox
reserves
the
right
to
change
any
of
its
opinions
expressed
herein
at
any
time
as
it
deems
appropriate.
Elmrox
disclaims
any
obligation
to
update
the
data,
information
or
opinions
contained
in
this
presentation.
2
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Variant
Perception
• Commodity
chemicals
valuation
(5x–7x
EBITDA)
does
not
reMlect
the
Company’s
transformation
to
a
specialty
chemicals
business
(comps
8x-‐12x
EBITDA)
- One
of
strongest
and
most
predictable
earnings
growth
proMiles
in
materials
- Much
stronger
pricing
power
and
more
sustainable
margins
that
market
gives
credit
for
- Much
less
cyclical
than
market
realizes
(~20%
of
sales)
- ~80%
of
EBITDA
comes
from
competitive
advantaged,
specialty
chemical
businesses
• Free
cash
Mlow
generation
potential
and
amount
of
cash
that
can
be
returned
to
shareholders
is
underappreciated
• Consensus
does
not
assume
a
turnaround
of
Water
business
under
new
management;
if
turnaround
does
not
materialize,
Water
will
be
monetized
with
cash
proceeds
likely
returned
to
shareholders
(2013/2014)
• Consensus
incorrectly
believes
that
Water
business
is
exposed
to
North
American
newsprint
paper
• Current
share
price
ascribes
little
value
to
unique
and
valuable
Valvoline
asset;
Multiple
options
for
unlocking
signiMicant
shareholder
value
including
a
tax-‐free
spinoff
and/or
MLP
qualiMication
(2014/2015)
• Valvoline
Instant
Oil
Change
(“VIOC”)
store
base
is
hidden
asset
where
signiMicant
incremental
value
can
be
created
with
little
(if
any)
capex
• Raw
material
concerns
especially
around
guar
and
oil
are
exaggerated
and
misunderstood
• Consensus
does
not
assume
any
recovery
in
Europe
in
FYE
2014
and
FYE
2015
despite
end
market
improvements
• Cheap
option
on
U.S.
housing
recovery
through
Performance
Materials
segment
(2013-‐2015)
• Free
option
on
higher
interest
rates
through
pension
• Private
market
valuation
creates
margin
of
safety
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c!
Why
Invest
in
Specialty
Chemicals?
• Long-‐term
growth
• More
consistent,
predictable
performance
• Strong,
sustainable
margins
• SigniMicant
hurdles
for
new
entrants
• Technology
driven,
difMicult
to
displace
Technology
Switching
Costs
Intellectual
High
Barriers
to
Property
Entry
• Highly
tailored
• RequaliMication
periods
• High
number
of
• SigniMicant
amount
of
products
costly
and
time
- Patents
backward
integration
• Customer-‐intimate
consuming
- Trade
secrets
• Stand-‐alone
plant
technology
model
• Products
typically
• Large
degree
of
capital
is
$40M+
• Push
for
constant
represent
small
%
of
manufacturing
know-‐ • Full
supply-‐chain
innovation
customer’s
Minal
how
replication
would
cost
product
$
billions
9
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ISP
Acquisition
• In
2011,
ASH
acquired
global
specialty
chemical
=irm,
International
Specialty
Ingredients
(“ISP”),
for
$3.2bn
- Management
used
the
cash
proceeds
from
selling
its
low
margin
and
cyclical
Distribution
business
and
highly
attractive
debt
Minancing
to
acquire
high
growth
and
high
margin
ISP
- ISP
was
acquired
from
the
estate
of
the
late
Minancier
Sam
Heyman.
Heyman
had
previously
attempted
to
combine
ISP
with
Hercules
in
2002
(ASH
purchased
Hercules
in
2008)
• High
Quality
Asset
That
Furthered
Transformation
to
a
Leading
Specialty
Chemical
Firm
- Manufactured
highly
specialized
chemicals
to
meet
customers’
unique
speciMications
- Products
represent
a
small
fraction
of
customers’
overall
costs,
and
provide
high
functionality
(mission-‐critical)
- Had
broad
technology
portfolio
protected
by
patents,
trade
secrets
and
manufacturing
know-‐how
- High
capital
costs
to
replicate
manufacturing
capabilities
(signiMicant
barriers
to
entry)
- With
EBITDA
margins
~24%
in
FYE
2011,
the
transaction
was
immediately
accretive
• Signi=icantly
Upgraded
Existing
ASH
Portfolio
- Strengthened
positions
in
a
number
of
important
high-‐growth,
high-‐margin
end
markets
such
as
pharmaceuticals
and
personal
care
(hair
care,
skin
care,
oral
care)
- Broadened
IP
portfolio
of
water-‐soluble
polymers
and
global
R&D
and
applications
capability
- Had
strong
pipeline
of
new
products
to
drive
growth
of
combined
business
- Deepened
relationships
with
existing
customers
and
enhanced
penetration
of
existing
markets
• Signi=icant
Long-‐Term
Cost
and
Revenue
Synergies
- $300mm
plus
sales
synergies
by
FYE
2015
from
complementary
product
offerings
in
familiar
ASH
segments:
food
&
beverage,
energy,
pharma,
skin
care,
oral
care,
hair
care
- At
least
$50mm
in
cost
reductions
Source:
Company
data.
11
Transformation
Driving
Outperformance
12
Competitive
Advantages
&
Moats
High
Barriers
to
Entry
Leading
Economies
of
Scale
High
Switching
Costs
ü High
capital
costs
to
replicate
ü #1
or
#2
in
position
in
its
ü Extensive
relationships
with
manufacturing
capabilities
global,
core
chemistries
leading
consumer
products
and
pharmaceutical
providers
ü Stand-‐alone
plant
capital
is
ü Broad
global
footprint
that
over
$40+
million
sells
into
more
than
100
ü Unique
technology
portfolio
countries
highly
customized
to
meet
ü Full
supply-‐chain
replication
demanding
customer
would
cost
billions
ü 30
manufacturing
locations
applications
ü High
number
of
active
patents
ü 20
technology
centers
ü RequaliMication
periods
costly
and
trade
secrets
and
time
consuming
ü Active
program
of
ü Approximately
400
scientists
collaboration
with
academia
ü Mission-‐critical
products
that
positioned
globally
typically
represent
a
small
%
ü A
full
complement
of
testing
of
overall
cost
of
a
customer’s
services
for
personal
care
product
companies
Minal
product
13
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45&6223"11&>%1458"3&$""21&
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!
!!
Aj!
Well-‐Positioned
Product
Portfolio
Pharmaceuticals
Personal
Care
Emerging
Energy
Middle
Class
• Aging
population
• Global
focus
on
anti-‐ • Consumer
spending
• Horizontal
and
aging
inMluenced
by
global
deepwater
wells
• Global
access
to
health
middle
class
require
2x
the
care
• Increased
global
specialty
chemicals
per
consumer
awareness
• Improved
product
• Controlled
release
rig
of
UV
protection
/
performance
forms
(medication)
suncare
• Depressed
natural
gas
• Manufacturing
cost
• Rapid
growth
of
in
North
America
and
• Male
grooming,
efMiciency
generics
leading
to
shift
from
dry–gas
to
particularly
in
young
lower
price
and
• Environmental
/
more
liquid-‐rich
wells
men
increased
availability
Regulation
• Unconventional
wells,
• Desire
for
simple,
• Pharmaceutical
R&D
including
shale
gas
in
natural
/
green
centers
located
North
America
products
worldwide
• Environmental
/
Regulatory
Source:
Company
data.
17
Strong
Balance
Sheet
&
Liquidity
Improving
cash
=low
should
lead
to
rapid
de-‐levering
through
FYE
2015.
• Very
manageable
maturity
schedule
18
Predictable
&
Growing
Free
Cash
Flow
• FYE
2013
and
FYE
2014
growth
capex
of
~$220mm
with
80%
allocated
to
Specialty
Ingredients,
given
capacity
constraints
• Tax rate should fall to mid 20s by FYE 2014 from high 20s over the last few years
• Consensus
does
not
understand
the
signiMicant
decline
in
pension
cash
commitments
in
FYE
9/30/2014
and
FYE
9/30/2014
• Based
on
our
diligence,
ASH
should
generate
between
~
$1.2bn
to
$1.4bn
in
cumulative
free
cash
Mlow(1)
through
FYE
9/30/2015
or
approximately
~$15
to
$17
per
share
(1) Free cash Mlow deMined as : (EBITDA – capex – cash interest – cash taxes – environmental payments – pension/OPEB) / (equity market capitalization).
19
Capital
Allocation
&
Cash
Management
“We
have
taken
a
disciplined
approach
to
managing
cash.
We
have
used
it
to
make
strategic
acquisitions,
to
invest
in
organic
growth,
and
to
return
capital
to
our
shareholders.
We
will
continue
to
look
for
ways
to
unlock
value
and
generate
signi=icant
returns
for
Ashland
shareholders.”(1)
(1)
CEO
Jim
O’Brien,
May
15.
2013.
20
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B?!
Water
Turnaround
Initiative
1. Consolidated
business
into
two
segments:
• Rich
pipeline
of
innovation
platforms
with
a
• reduces
management
complexity
number
of
products
in
launch
phase:
• Aligns
business
by
customer
and
• Bioguard
–
Packaging
market
opportunity
• OptiMilm
–
Printing
&
Writing
• $20mm
full-‐year
run-‐rate
SG&A
• Microbial
Control
–
Water
Tech
from
overheard
reduction
• Monitoring
&
Diagnosis
-‐
Industrial
2. Bringing
in
the
right
team:
• Strong
R&D
Portfolio
• New
talent
for
marketing
and
geographic
expansion
Improving
a
Repeatable
Process
Realigned
sales
force
to
better
•
address
customer
needs
• Multi
regional
marketing
3. Improve
Execution:
• Selling
process
• At
customer
level
• Pricing
management
• Accelerate
new
product
penetration
• Contract
administration
• Channel
management
Hired
Luis
Fernandez-‐Moreno
as
new
President
of
Water
in
late
2012.
He
has
30
years
of
relevant
• Corporate
customer
focus
industry
experience
(Arch,
Dow,
Rohm
&
Haas)
• Sales
and
operations
planning
33
Potential
Upside
at
Water
34
If
Water
is
Not
Fixed,
a
Sale
is
Likely
“New
leadership…by
the
summer,
we
should
be
able
to
tell
if
this
is
making
a
difference
or
not.
If
it's
not
making
a
difference
then,
obviously,
that
limits
our
alternatives
in
what
we
can
do,
and
we'll
start
to
take
a
hard
look
of
what
the
outcome
will
be.”
-‐
CEO
Jim
O’Brien,
Q4
2012
Earnings
Call,
October
30,
2012
• Given
Water’s
scale,
breadth
of
products,
and
IP
knowledge
there
would
likely
be
a
number
of
interested
strategic
and
Minancial
buyers.
Water
asset
is
highly
attractive
platform
for
consolidating
a
fragmented
global
industry.
• It
is
unlikely
that
Ashland
would
sell
Water
for
less
than
ASH’s
consolidated
multiple
of
7x
FYE
2014E
EBITDA.(1)
Given
the
turnaround
underway,
the
signiMicant
breadth
and
scale
of
the
platform
for
industry
consolidation,
potential
synergies/cost
savings,
we
believe
Water
could
sell
for
8x
to
12x
PF
LTM
3/31/2013
EBITDA
of
$163mm
• Potential
Strategic
Buyers:
Permira,
BASF,
SNF,
Danaher
(GE
and
Ecolab
less
likely
given
potential
DOJ
issues
and
GE
capital
allocation
priorities
towards
other
industries)
• Financial
Sponsors:
Likely
strong
interest
from
private
equity
given:
(i)
the
platform
for
consolidation
it
represents;
(ii)
the
operational
turnaround
opportunities;
and
(iii)
global
secular
growth
trends
.
Given
current
strength
in
bank
loan
and
high
yield
markets,
we
think
a
private
equity
Mirm
could
purchase
Water
with
up
to
4.0x
to
6.0x
total
leverage
Water&Potential&Valuation Sensitivity)Analysis
Low High Water
LTM*3/31/13*PF*EBITDA $163 $163 EBITDA EBITDA)Multiple
EBITDA*Multiple 8.0x 12.0x 8.0x 9.0x 10.0x 11.0x 12.0x
Implied&Water&Gross&Value $1,304 $1,956 $143 $1,144 $1,287 $1,430 $1,573 $1,716
Ashland*Shares 79 79 $153 $1,224 $1,377 $1,530 $1,683 $1,836
Water&Gross&Value&per&Share $17 $25 $163 $1,304 $1,467 $1,630 $1,793 $1,956
%*of*current*ASH*price 20% 29% $173 $1,384 $1,557 $1,730 $1,903 $2,076
Source:
Based
off
consensus
estimates
as
of
July
16,
2013.
$183 $1,464 $1,647 $1,830 $2,013 $2,196
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f?!
Valvoline
Organic
Opportunities
“The
most
valuable
businesses
in
the
world
are
brand
royalty
businesses
that
can
grow
without
capital
investment.”
Organic Opportunities
ü Capitalize
on
ü Leverage
ü New
Product
ü Expand
and
ü Base
oil
secular
shifts
Instant
Oil
Penetration:
strengthen
capacity
- Shift
from
DIY
Change
Drive
international
expansions
to
higher
business
model
NextGen™
trial
presence
in
should
further
margin
DIFM
to
grow
and
MaxLife™
emerging
reduce
organically
and
growth
regions
volatility
- Mix
shift
to
gain
share
higher
margin
premium
products
N.B.:
Quote
from
Pershing
Square
Capital
Management,
L.P.
presentation,
“Justice
is
Best
Served
Flame
Broiled,”
April
4,
2012.
43
Innovative
Brands:
NextGenTM
Consumer
Objectives
Results
to
Date
Next
Steps
Proposition
• Introduced
in
Spring
• Drive
signiMicant
DIY
• DIY
available
in
14,500
• Execute
recycling
2011
share
growth
and
retail
auto
parts
stores
program
initiatives
DIFM
consumer/ with
retailers
to
drive
• Better
for
• Estimated
600,000
DIY
installer
loyalty
trial
environment
early
adopters;
$34
• Increase
base
oil
million
in
sales
for
• Continue
advertising
- 50%
recycled,
re-‐
purchasing
leverage
Miscal
2011
focus
reMined
oil
by
driving
• NextGenTM
represents
• Establish
national
bulk
• No
compromise
to
development
of
re-‐
19%
of
oil
changes
at
distribution
for
VIOC,
quality
reMined
market
$5
premium
Installer
channels
- 100%
Valvoline
• Establish
NextGenTM
• Fleet
opportunity
for
protection
in
VIOC
company
both
VIOC
and
C&I
stores
• Similar
price
point
businesses
44
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2$1!&01-&91!e!28*P12!51-!*4#2.,1-!
!
•! "01-&91!#:#21,TF8(1!#2.-1!9-.F2$!.J!&55-./8,&21%:!f@!51-!:1&-!$8#2.-8*&%%:!
!!
-! i-&'*$8#1!#:#21,!9-.F2$!1/51*21(!2.!.425&*1!*.,5&':!#2.-1!9-.F2$!K:!?hA!
-! S4,1-.4#!#,&%%1-!-198.'&%!*.'#.%8(&28.'!.55.-24'8281#!.J!5-80&21%:!$1%(!*$&8'#!
&
J*KA&/1&6&:/22"$&611"4&4:64&>6$&I"&%1"2&61&6&@B647538&753&<3594:_&
&
R.4-*1h!S&28.'&%![8%!^!E4K1!S1F#!&'(!H.,5&':!C&2&!!
fj!
U.S.
Competitive
Landscape
for
VIOC
Minimal
capex
required
to
re-‐brand
existing
privately
held
store
networks.
47
Z)[H!R2.-1!+*.'.,8*#!
&
."6$/$<7%B&5@@534%$/4/"1&45&/$>3"61"&6#"36<"&a&4/>E"4&@"3&>%1458"3_ &
&
A58@6$C&;453"1&& P36$>:/1"&;453"1&&
R.4-*1h!H.,5&':!(&2&D!
fc!
Valvoline
International
• Addressable Market
- 6.3 billion gallons per year versus 800 million in the U.S.
- India Joint Venture: expanding distributor network; new blending & packaging plant
- Valvoline’s focus has been on heavy-‐duty transportation and power generation
49
International
Landscape
for
VIOC
While
#2
share
position
in
US,
VIOC
has
no
internationally
branded
stores.
Top$US'Based$Chains$with$Foreign$Facilities
• Big
opportunity
for
growth
and
penetration
particularly
among
Total %$Share
developing
markets
1 Mobil'1'Centers 2,188 48.5%
2 Texaco'Havoline'xpress'lube 1,432 31.8%
3 Walmart'Tire'&'Lube'Express 266 5.9%
• Branded
International
Market
4 Midas'Auto'Service'Experts 160 3.5%
consists
primarily
of
~4,500
US-‐ 5 Jiffy'Lube 150 3.3%
6 Precision'Tune'Auto'Care 82 1.8%
based
chains
with
foreign
7 Meineke'Care'Care'Centers 78 1.7%
facilities
8 Pennzoil 75 1.7%
9 Grease'Monkey 65 1.4%
10 AAMCO 11 0.2%
• Growing
and
highly
fragmented
11 Citgo 1 0.0%
market
in
its
infancy
Total$US'Based$Chains$with$Foreign$Facilities 4,508
50
Market
Ascribes
Little
Value
to
Valvoline
Using
an
illustrative
specialty
chemical
EBITDA
multiple
range
of
8x-‐10x
and
illustrative
FYE
9/30/15E
ASH
EBITDA
range
of
$1.4bn
to
$1.6bn
suggests
the
market
implied
valuation
of
Valvoline
is:
$0
to
$1.1bn.
Valvoline)Implied)Valuation Sensitivity)Analysis
ASH$consolidated$9/15E$EBITDA $1,400 $1,600 FYE)9/15E
$Less:$Valvoline$EBITDA ($350) ($350) EBITDA ASH)EBITDA)Multiple
ASH$EBITDA$exEValvoline $1,050 $1,250 7.0x 7.5x 8.0x 8.5x 9.0x
EBITDA$Multiple 8.0x 8.0x $1,400 $2,110 $1,585 $1,060 $535 $10
Implied$ASH$Value$exEValvoline $8,400 $10,000 $1,450 $1,760 $1,210 $660 $110 $0
Plus:$2014E$&$2015E$FCF 1,200 1,400 $1,500 $1,410 $835 $260 $0 $0
Total$Implied$Value$exEValvoline $9,600 $11,400 $1,550 $1,060 $460 $0 $0 $0
$1,600 $710 $85 $0 $0 $0
Current$ASH$Enterprise$Value $10,660 $10,660 $1,650 $360 $0 $0 $0 $0
$Less:$Value$exEValvoline ($9,600) ($11,400)
Implied)Valvoline)Value $1,060 $0
Implied$Valvoline$Value$per$Share $14 $0
Valvoline$EBITDA $350 $350
Implied$Valvoline$Multiple 3.0x 0.0x
N.B.: EBITDA multiple in Valvoline implied valuation table conservatively assumes the low-‐end of specialty chemical EBITDA multiple range of 8x-‐12x.
51
How
Much
Is
Valvoline
Worth?
Valvoline)Potential)Valuation Sensitivity)Analysis:)Value)per)Share
Low High
Valvoline.Normalized.EBITDA $400 $400 EBITDA EBITDA)Multiple
EBITDA.Multiple (1) 8.0x 12.0x 8.0x 9.0x 10.0x 11.0x 12.0x
Implied)Valvoline)Value $3,200 $4,800 $350 $36 $40 $45 $49 $54
Ashland.Shares 79 79 $375 $38 $43 $48 $53 $57
Valvoline)Value)per)Share $41 $61 $400 $41 $46 $51 $56 $61
Market.Implied.Value.per.Share $14 $14.00 $425 $43 $49 $54 $60 $65
%.difference 191% 337% $450 $46 $52 $57 $63 $69
Valvoline
has
low
maintenance
capex
of
~$36mm
or
less
than
2%
of
sales.
(1) Represents
a
blended
multiple
of
specialty
chemicals
(8x-‐12x
EBITDA)
and
leading
consumer
franchises
(10x
-‐14x
EBITDA).
(2) Market
Implied
Value
per
share
of
$14
from
previous
slide.
52
Potential
Ways
to
Unlock
Trapped
Value
• Based
on
our
diligence,
we
believe
Valvoline
has
a
low
tax
base
and
an
outright
sale
would
likely
not
be
the
most
tax
efMicient
mechanism
to
release
trapped
value
for
shareholders.
- Given
its
predictability,
low
capex
growth
model,
and
high
cash
Mlow
generation,
an
independently
traded
Valvoline,
would
likely
be
in
high
demand
among
income
oriented
investors
- Given
its
operational
proMile
and
high
cash
Mlow
generation,
Valvoline
could
qualify
as
an
MLP
for
tax
purposes
and
would
likely
be
in
high
demand
among
yield
oriented
investors
53
Potential
Further
Value
Creation
as
MLP
• IRS
Private
Letter
Ruling
released
August
10,
2012
(PLR-‐104854-‐12)
for
MLP
quali=ication:
- “principally
engaged
in
the
gathering,
processing,
transportation,
storage,
and
distribution
of
reMined
petroleum
products”
- “income
derived…from
additization
activities
is
qualifying
income”
for
MLP
status
- qualifying
MLP
income
under
Section
7704(d)(1)(E)
of
the
Internal
Revenue
Code
:
“income
or
gains
derived
from….processing,
reMining,
transportation,
or
the
marketing
of
any
mineral
or
natural
resource”
• Ashland
10-‐K
for
FYE
9/30/2012
describing
Valvoline’s
activities:
- “operates
blending
and
packaging
plants”
- “blending
and
distribution”
- “additives
and
base
oils
constitute
a
large
portion
of
the
raw
materials
required
to
manufacture
[Valvoline]
products”
54
How
Could
Valvoline
Qualify
as
a
MLP?
- “Produces
[and
distributes]
a
broad
slate
of
reMined
[petroleum-‐based]
products
including
gasoline,
diesel,
jet
fuel
and
asphalt”
(2)
- Produces
and
distributes
petroleum-‐based
products
including
gasoline,
natural
gas
liquids,
asphalt,
jet
fuel,
and
other
reMined
products
(3)
55
Operations
That
Could
Qualify
for
MLP
Valvoline
has
plants
and
distribution
capabilities
akin
to
entities
that
already
qualify
as
MLP’s
for
tax
purposes.
56
Illustrative
Valvoline
MLP
Valuation
Given
the
predictability
and
low
capital
needs
of
Valvoline,
a
potential
MLP
could
trade
near
comparables
that
possess
similar
high
degrees
of
visibility
of
distribution
growth.
Such
MLPs
trade
between
4%
to
8%
yields.
Valvoline)MLP)Valuation MLP$Enterprise$Value
MLP)Enterprise)Value
EBITDA'(FYE'9/14E) $350 EBITDA Yield
(4)'Maintenance'Capex (36) 4.0% 5.0% 6.0% 7.0% 8.0%
(4)'Interest 0 $325 $7,225 $5,780 $4,817 $4,129 $3,613
Distributable'CF $314 $350 $7,850 $6,280 $5,233 $4,486 $3,925
Yield 5.0% $375 $8,475 $6,780 $5,650 $4,843 $4,238
Implied'Equity'Value $6,280 $400 $9,100 $7,280 $6,067 $5,200 $4,550
(+)'Net'Debt 0 $425 $9,725 $7,780 $6,483 $5,557 $4,863
Enterprise'Value $6,280
Implied'EBITDA'Multiple 17.9x Implied(MLP(EBITDA(Multiples
EBITDA Yield
Valvoline
as
a
MLP
could
be
4.0%
5.0% 6.0% 7.0% 8.0%
worth
$4bn
to
$9bn
versus
$325 22.2x 17.8x 14.8x 12.7x 11.1x
$350 22.4x 17.9x 15.0x 12.8x 11.2x
ASH
current
equity
market
$375 22.6x 18.1x 15.1x 12.9x 11.3x
capitalization
of
$6.7bn.
$400 22.8x 18.2x 15.2x 13.0x 11.4x
$425 22.9x 18.3x 15.3x 13.1x 11.4x
57
How
Much
Value
Could
an
MLP
Create?
We
believe
a
Valvoline
MLP
would
garner
a
premium
valuation
relative
to
most
MLPs:
much
less
cyclical,
signi=icantly
less
capital
intensive,
and
manufactures
highly
engineered,
branded
consumer
products.
MLP$$Value$Creation MLP$per$Share$Value$Creation
MLP$per$Share$Value$Creation
Implied(MLP((Equity(Value $6,280 EBITDA Yield
ASH(Shares(Outstanding 79 4.0% 5.0% 6.0% 7.0% 8.0%
Equity(Value(Per(Share $80.00 $325 $63.24 $44.83 $32.56 $23.80 $17.22
$350 $68.99 $48.99 $35.65 $26.13 $18.99
ASH(EBITDA(Reduction ($350) $375 $74.73 $53.14 $38.75 $28.46 $20.75
ASH(EV(Multiple 7.0x $400 $80.48 $57.30 $41.84 $30.80 $22.52
EV(Value(Reduction ($2,450) $425 $86.23 $61.45 $44.93 $33.13 $24.28
ASH(Shares(Outstanding 79
(Q)(ASH(EBITDA(Reduction ($31.01)
Net$Value$Creation $48.99
%(from(current 57.6%
Unlike
most
MLPs,
Valvoline
is
not
capital
intensive
and
thus
would
likely
not
require
leverage
to
grow.
High
recurring
cash
=low
would
be
returned.
N.B.: MLP Valuation Creation table conservatively assumes the current forward EV/EBITDA multiple of 7x of Ashland as of July 16, 2013..
58
&
J6B%64/5$&'&P/$6$>/6B1&
&
&
59
We
believe
ASH
is
Undervalued
60
Why
This
Opportunity
Exists
Market
fails
to
recognize
transformation
to
leading
specialty
chemical
=irm.
Pharmaceuticals
• Many
moving
pieces
mask
true
underlying
value
• Long
history
of
being
deeply
cyclical
company
with
its
“old”
portfolio
Personal
Care
61
Why
are
ASH
Shares
Cheap?
• Guar
exposure
• Guar
pricing
bubble
in
the
past.
F3Q2013
is
most
difMicult
comp.
Management
considering
divesting
commodity
guar
operations
to
eliminate
potential
volatility
• Oil
exposure
• Limited
direct
exposure.
Base
oil
Group
II
(an
oil
derivative)
is
input
for
Valvoline
–
pricing
covers
input
inMlation
with
3-‐4
month
lag.
Group
II
overcapacity
growing
2013-‐2015
• Valvoline
difMicult
to
value
recurring-‐cash
Mlow
business
with
small
capex
requirements
with
strong
consumer
brands
and
differentiated
products.
Has
hidden
growth
asset
in
U.S.
store
branded
store
base
• Cash
Mlow
will
normalize
as
growth
capex
sunsets,
lower
interest
• Weak
cash
Mlow
costs
annualize,
and
tax
rates
fall
towards
mid
20s;
Consensus
overestimates
cash
pension
payments
in
FYE
2014
and
FYE
2015
• Underfunded
pension
• 200
bps
move
in
the
discount
rate
eliminates
underfunding,
which
generally
tracks
the
AA
corporate
bond
spread
• This
was
before
the
recent
move
in
interest
rates
in
2Q2013
• Management
will
make
poor
• Management
has
long
history
of
being
patient
and
thoughtful
capital
allocators
managing
the
portfolio.
acquisition
62
Multiple
Ways
to
Create
Value
Organic
Growth
+
Under-‐Appreciated
Assets
Valvoline
63
Opportunity
for
Multiple
Expansion
EV/EBITDA
9x
6x
7x
P/E
16x
10x
11x
Multiple
Expansion
N.B.:
Specialty
chemicals
include:
ALB,
CYT,
DD,
ECL,
FMC,
GRA,
POL,
PPG,
ROC,
RPM,
SHW,
VAL.
N.B.:
Commodity
chemicals
include:
DOW,
HUN,
KRA,
LYB,
MEOH,
OLN,
OMN,
WLK.
N.B.:
Multiples
based
on
sell
side
estimates
and
share
prices
as
of
July
16,
2013.
STRICTLY
CONFIDENTIAL
64
"Rn!8#!H4--1'2%:!l'(1-T+&-'8'9!
&
.6$6<"8"$4&:61&6BB5>64"2&1/<$/=/>6$4&>6@/46B&45&<3594:_ &
&
•! )'!2$1!,8((%1!.J!BT:1&-!*&582&%!#51'(!5-.9-&,!.J!&55-./8,&21%:!
e?@@,,!51-!:1&-!
E&-91!
-! [01-!U@V!.J!*&582&%!*.'#8#2#!.J!9-.F2$!&'(!5-.(4*28082:!5-.O1*2#! AA!W-.O1*2#!
ye?@!,8%%8.'!
"! f!5%&'2!1/5&'#8.'#!*.,8'9!.'T%8'1!8'!?@AB!
X8(TR8L1!
-! R51*8&%2:!)'9-1(81'2#!*.'#282421#!c@oV!.J!"#$%&'(N#!9-.F2$!*&582&%! BB!W-.O1*2#!
eU!2.!e?@!,8%%8.'!
•! I:58*&%!)mm!$4-(%1#!.'!&!'1F!*&51/!5-.O1*2#!-&'91!8'!2$1!$89$!211'#!J.-! W-.(4*2!E8'1!+/21'#8.'#!
9-11'M81%(!&'(!?@V!2.!B@V!J.-!K-.F'M81%(!1/5&'#8.'#! B?!W-.O1*2#!
e?!2.!eU!,8%%8.'!
H352%>4&P68/BC& k&57& H35j">4R1U& (0@">4"2& A58@B"4/5$&
H35j">41& dZ[Y& dZ[\& dZ[e& L"9&H352%>4&;6B"1&Ra&/$&8/BB/5$1U&
de^&57&;6B"1&
n+H! ?! X8(! TT! E&21!
C1-80&28L1(!34&-! B! E&21! X8(! +&-%:! &af[b_Z&&
XH! ?! TT! TT! IaC! &a\YW_Z&& &a\b\_Z&&
HXH! ?! E&21! TT! +&-%:!
WZW! A! TT! TT! X8(!
Z8':%!+2$1-#! A! TT! TT! IaC!
?@A@! ?@AA! ?@A?! E.'9T
RP8'TH&-1!"*2801#! A! X8(! TT! 21-,!
jU!
Illustrative
ASH
Standalone
Valuation
Specialty
chemical
=irms
generally
trade
for
8x
to
12x
EBITDA
in
the
public
markets
versus
commodity
chemical
assets
at
4x
to
7x
EBITDA.
!
ASH!Potential!Standalone!Valuation
Sensitivity)Analysis
Low High
ASH*EBITDA*(FYE*9/30/15E) $1,400 $1,600 EBITDA EBITDA)Multiple
EBITDA*Multiple 8.0x 8.0x 8.0x 9.0x 10.0x 11.0x 12.0x
Implied!Firm!Value $11,200 $12,800 $1,400 $107 $125 $143 $161 $178
Less:*Net*Debt (3,991) (3,991) $1,450 $112 $131 $149 $168 $186
Plus:*2014E*&*2015E*FCF 1,200 1,400 $1,500 $117 $136 $156 $175 $194
Implied*Equity*Value 8,409 10,209 $1,550 $122 $142 $162 $182 $201
Ashland*Shares 79 79 $1,600 $128 $148 $168 $189 $209
Implied!Equity!Value!per!Share $107 $130
Current*Price $85 $85
%*from*current 26% 53%
Even
if
revenue
growth
remains
=lat
in
FYE
2014
and
FYE
2015,
ASH
should
generate
~$15
to
~$17
per
share
of
cumulative
free
cash
=low.(1)
N.B.:
EBITDA
multiple
in
ASH
Potential
Standalone
Valuation
table
conservatively
assumes
the
low-‐end
of
specialty
chemical
EBITDA
multiple
range
of
8x-‐12x.
This
analysis
conservatively
assumes
no
additional
share
repurchases
and
excludes
dividends.
66
Illustrative
Sum-‐of-‐Parts
Valuations
67
Illustrative
Sum-‐of-‐Parts
Valuations
(cont’d)
68
Attractive
Leveraged
Buyout
Candidate
Strong
free
cash
=low
and
low
cyclicality
=
Attractive
private
equity
returns
Signi=icant
Sustainable
Margins
Competitive
High
Free
Cash
Flow
Advantages
(Barrier
Global
Footprint
and
Characteristics
and
Pricing
Power
to
Entry,
Switching
Scale
Costs,
Patents)
69
i-11![528.'!.'!n89$1-!)'21-1#2!m&21#!
&
&gdZZI@1&/$>3"61"&/$&2/1>5%$4&364"&1:5%B2&I3/$<&@"$1/5$&@B6$&45&7%$2"2&
1464%1_&+:/1&"n%64"1&45&gadd&@"3&1:63"&57&/$>3"8"$46B&"n%/4CB%"_R[U& &
!
!!
-;Om1&@"$1/5$&2/1>5%$4&364"&4"$21&45&436>E&4:"&--&>53@5364"&I5$2&1@3"62_& &
R.4-*1h!"#$%&'(!id+!?@A?!A@Ts!%8#2#!4'J4'(1(!#2&24#!.J!51'#8.'!5%&'!&'(!.2$1-!5.#2-128-1,1'2!K1'1M82!.K%89&28.'#!&#!eADUK'!&'(!e?UU,,!-1#51*2801%:D!
<A=!I$8#!F&#!5-8.-!2.!2$1!45F&-(!,.01!8'!8'21-1#2!-&21#!#8'*1!X&:!?@ABD!
!!!!
`@!
Management
Gets
It
• The
accelerated
share
repurchase
plan
(“ASR”)
with
Citibank
was
part
of
a
$600mm
common
stock
buyback
plan
that
expires
December
31,
2014.
• At
the
current
share
price,
management
could
repurchase
~15%
to
~20%
of
ASH
shares
between
2014
and
2015
using
discretionary
free
cash
Mlow(1)
• Share repurchases may accelerate further as free cash Mlow normalizes through 2015
• The
Board
also
increased
the
quarterly
dividend
51.1%
in
May
2013
to
34
cents
per
quarter
in
recognition
of
increasing
cash
Mlows
over
the
next
few
years.
• Despite
the
2Q2013
move
in
U.S.
interest
rates,
the
current
environment
makes
debt
Minancing
an
additional
and
attractive
source
of
capital
f
or
share
repurchases.
Source:
Discretionary
free
cash
Mlow
deMined
as
free
cash
Mlow
–
less
dividends.
71
Management
Aligned
with
Shareholders
“Programs
should
create
alignment
between
the
interests
of
the
executives
and
the
shareholders
by
ensuring
that
compensation
opportunities
for
executives
are
linked
to
building
long-‐
term
shareholder
value.”(1)
- Operating income
• Majority of compensation at risk for senior management tied to long-‐term metrics:
- CEO: 84% tied to long-‐term and annual incentives (64% long-‐term / 20% annual)
- Other
executive
ofMicers:
70%
at
risk
(44%
long-‐term
/
26%
annual)
72
Conclusion
Valuable
and
high
quality
assets
trading
at
substantial
discount
to
intrinsic
value.
Multiple
paths
to
signi=icant
shareholder
value
creation.
Private
market
value
provides
margin
of
safety
and
limits
downside
risk.
73
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76
Executive
OfMicers
James
J.
O'Brien,
Chairman
and
Chief
Executive
OfRicer,
Age:
58
Since
2002,
O’Brien
served
as
chairman
and
chief
executive
ofMicer.
O'Brien
leads
Ashland's
Executive
Committee,
whose
members
set
Ashland's
global
strategy,
manage
its
capital,
and
uphold
Ashland's
operating
principles.
O'Brien
joined
the
former
Ashland
Chemical
Company
in
1976
as
an
accountant,
a
year
after
starting
as
an
accounting
intern.
He
quickly
moved
into
operations,
serving
in
product
marketing
and
sales
management
positions
in
the
chemicals
and
plastics
businesses
during
the
'80s.
By
1992,
O'Brien
had
gained
the
attention
of
then-‐Chairman
and
CEO
John
R.
Hall.
Hall
tapped
O'Brien
to
serve
as
his
executive
assistant
to
support
him
as
the
company
grew
its
nonreMining
businesses,
strengthened
its
competitive
position
and
focused
on
reducing
its
dependence
on
earnings
from
reMining.
In
1995
he
was
named
president
of
the
company's
Valvoline
division
and
became
an
executive
ofMicer
of
Ashland.
At
Valvoline,
O'Brien
and
his
team
implemented
a
master
brand
strategy,
while
driving
innovation
and
expanding
the
product
line.
In
2001,
as
group
operating
ofMicer,
O'Brien
initiated
the
successful
redesign
of
the
Ashland
Distribution
business
model
and
increased
Ashland
Specialty
Chemical's
focus
on
markets,
new
products
and
applications
and
geographic
expansion.
A
native
of
Circleville,
Ohio,
O'Brien
is
a
graduate
of
The
Ohio
State
University,
from
which
he
earned
a
bachelor's
degree
in
accounting
and
Minance
and
a
master's
degree
in
business
administration.
He
is
a
1994
graduate
of
Leadership
Kentucky.
J.
Kevin
Willis,
Senior
Vice
President
and
Chief
Financial
OfRicer,
Age:
47
Mr.
Willis
was
elected
senior
vice
president
and
chief
Minancial
ofMicer
of
Ashland
in
2013.
He
oversees
Ashland's
worldwide
Minancial
functions
and
processes,
including
Minancial
accounting
and
reporting,
treasury
and
Minance,
insurance,
business
development,
planning
and
analysis,
investor
relations,
tax
and
internal
audit
activities.
A
member
of
Ashland's
Executive
Committee,
he
shares
overall
responsibility
for
setting
Ashland's
global
strategy,
managing
capital,
and
upholding
Ashland's
operating
principles.
Willis
joined
Ashland
in
1987
as
an
associate
auditor
in
the
internal
audit
department.
He
served
in
various
management
positions
of
increasing
responsibility,
including
leading
teams
on
major
projects
in
the
business
services,
information
technology,
accounting
and
Minance
areas.
Spending
nearly
three
years
in
The
Netherlands,
he
helped
lead
Ashland's
effort
to
standardize
processes
and
implement
accounting
shared
services
across
European
operations.
In
2004,
Willis
was
designated
general
auditor.
Later
in
2007,
he
was
appointed
vice
president
and
treasurer
of
Ashland.
Since
Ashland's
acquisition
of
International
Specialty
Products
(ISP)
in
August
2011,
Willis
served
as
Ashland's
vice
president
of
Minance,
and
controller
for
Ashland
Specialty
Ingredients,
Ashland's
largest
and
fastest-‐growing
commercial
unit.
A
native
of
Richmond,
Ky.,
Kevin
earned
a
bachelor’s
degree
in
accounting
from
Eastern
Kentucky
University
and
an
MBA
from
the
Kellogg
School
of
Management
at
Northwestern
University.
John
E.
Panichella,
Senior
Vice
President
and
Group
Operating
OfRicer
of
Ashland;
and
President,
Ashland
Specialty
Ingredients,
Age:
53
Mr.
Panichella
was
elected
senior
vice
president
of
Ashland
in
2011
and
added
the
additional
position
of
group
operating
ofMicer
in
September
2012.
Also
in
2011,
he
became
president
of
Ashland
Specialty
Ingredients,
when
International
Specialty
Products
Inc.
was
acquired
and
merged
into
Ashland
Aqualon
Functional
Ingredients.
Panichella
joined
Ashland
in
2008
as
a
vice
president
and
president
of
Ashland
Aqualon
Functional
Ingredients,
following
Ashland's
acquisition
of
Hercules,
where
he
held
a
similar
position.
Prior
to
joining
Hercules
in
2006,
Panichella
enjoyed
a
25-‐year
career
with
General
Electric
and
BetzDearborn,
where
he
served
in
numerous
management
positions,
including
business
development,
operations
management,
sales
and
marketing,
and
strategic
development.
His
last
position
at
General
Electric
Water
and
Process
Technologies
was
vice
president
and
general
manager
of
the
Americas
business.
Before
joining
General
Electric,
he
served
as
vice
president
of
the
Global
Hydrocarbon
Processing
unit
of
BetzDearborn.
A
native
of
Pittsburgh,
Pa.,
Panichella
holds
an
M.B.A.
from
the
University
of
Phoenix
and
a
bachelor's
degree
in
chemistry
from
the
University
of
Pittsburgh.
Luis
Fernandez-‐Moreno,
Vice
President
and
President,
Ashland
Water
Technologies,
Age:
50
Mr.
Luis
Fernandez-‐Moreno
joined
Ashland
in
2012
as
president,
Ashland
Water
Technologies.
He
heads
a
worldwide
commercial
unit
that
holds
a
global,
leading
market
position
as
a
specialty
chemicals
supplier
of
process,
utility
and
functional
chemistries
for
the
papermaking
industry.
He
also
serves
as
vice
president
of
Ashland
and
a
member
of
the
Ashland
Operating
Committee.
A
30-‐year
veteran
of
the
global
chemical
industry,
Fernandez-‐Moreno
previously
served
as
executive
vice
president
of
Arch
Chemicals,
Inc.
where
he
was
responsible
for
the
wood
protection
and
HTH
water
products
businesses.
Prior
to
that,
he
served
as
business
group
vice
president
of
Dow
Coating
Materials
which
was
formed
after
Dow
Chemical
acquired
Rohm
&
Haas
in
2009.
He
previously
spent
more
than
25
years
with
Rohm
&
Haas
in
a
series
of
leadership
roles
spanning
across
Europe,
Latin
America
and
the
United
States.
Fernandez-‐Moreno
earned
a
Bachelor
of
Science
degree
in
chemical
engineering
from
Universidad
Iberoamericana
in
Mexico
City.
He
also
completed
the
Wharton
Management
Program
at
The
Wharton
School
at
the
University
of
Pennsylvania.
Source:
Company
Website
77
Executive
OfMicers
(cont’d)
Samuel
J.
Mitchell
Jr.,
Senior
Vice
President
and
President,
Ashland
Consumer
Markets,
Age:
51
Mr.
Mitchell
heads
Ashland
Consumer
Markets,
a
commercial
unit
of
Ashland
Inc.
His
responsibilities
include
leadership
of
the
worldwide
Valvoline
business
of
automotive
and
commercial
lubricants,
chemicals,
and
appearance
products,
as
well
as
growth
of
the
company's
quick-‐lube
business
and
continued
development
of
innovative
premium
products.
He
joined
Ashland
in
1997
as
director
of
marketing
for
Valvoline's
brand
management
group.
In
August
1999,
he
was
named
vice
president
of
marketing,
and
in
2000,
vice
president
and
general
manager
of
the
Valvoline
DIY
(Do-‐It-‐Yourself)
retail
business.
He
became
president
of
Valvoline
and
a
vice
president
of
Ashland
in
2002.
In
2011,
Mitchell
was
promoted
to
the
role
of
senior
vice
president
of
Ashland,
while
retaining
his
responsibilities
for
Ashland
Consumer
Markets.
Prior
to
joining
Ashland,
he
held
brand
and
category
management
leadership
positions
at
The
Clorox
Company
for
eight
years.
A
Birmingham,
Mich.,
native,
Mitchell
earned
a
bachelor's
degree
from
Miami
University,
Oxford,
Ohio,
and
a
master's
degree
in
business
administration
from
the
University
of
Chicago.
He
is
a
graduate
of
the
Harvard
Business
School's
Advanced
Management
Program.
Peter
Ganz,
Senior
Vice
President,
General
Counsel
and
Secretary,
Age:
50
Mr.
Ganz
joined
Ashland
in
2011
as
senior
vice
president
and
general
counsel,
responsible
for
managing
all
legal
and
corporate
governance
matters
pertaining
to
Ashland.
In
addition,
he
oversees
the
company's
government
relations
function
and
serves
as
Ashland's
chief
compliance
ofMicer,
chairing
its
Ethics
and
Compliance
Committee.
He
also
serves
as
a
member
of
Ashland's
Executive
Committee,
sharing
overall
responsibility
for
setting
Ashland's
global
strategy,
managing
capital,
and
upholding
Ashland's
operating
principles.
Immediately
prior
to
joining
Ashland,
Ganz
was
a
partner
with
the
law
Mirm
Sedgwick
LLP
in
Newark,
N.J.
From
2005
to
2010,
he
served
as
executive
vice
president,
general
counsel
and
secretary
of
Foster
Wheeler
AG,
a
global
engineering,
construction
and
project-‐management
contractor
and
power-‐equipment
supplier.
Previously,
he
was
senior
vice
president,
general
counsel
and
secretary
of
G-‐I
Holdings
Inc.
(formerly
GAF
Corp.)
and
of
its
afMiliate,
International
Specialty
Products
Inc.,
in
Wayne,
N.J.
Earlier
in
his
career,
Ganz
practiced
litigation
for
law
Mirms
McCarter
&
English
in
Newark,
N.J.,
and
Kramer,
Levin,
Nessen,
Kamin
&
Frankel
in
New
York,
N.Y.
He
began
his
legal
career
serving
a
federal
judicial
clerkship
with
the
Hon.
Anne
E.
Thompson
in
the
U.S.
District
Court
for
the
District
of
New
Jersey.
A
native
of
Charlotte,
N.C.,
Ganz
earned
his
bachelor
of
arts
degree
from
Duke
University
in
1984.
In
1987,
he
received
his
J.D.
degree
from
Harvard
Law
School.
He
is
a
member
of
the
New
York,
New
Jersey
and
Kentucky
state
bar
associations
and
the
American
Corporate
Counsel
Association.
Theodore
L.
"Ted"
Harris,
Senior
Vice
President
and
President,
Global
Supply
Chain
of
Ashland;
and
President,
Ashland
Performance
Materials,
Age:
47
Mr.
Harris
was
named
president,
Ashland
Performance
Materials,
in
2009.
n
addition,
as
president,
Global
Supply
Chain,
Harris
holds
Ashland-‐wide
responsibility
for
the
functions
that
encompass
the
manufacture
and
delivery
of
products
to
customers.
Harris
joined
the
company
in
2004
as
vice
president
and
general
manager
of
the
Composite
Polymers
group
within
Ashland
Performance
Materials.
In
2006,
he
was
named
a
vice
president
of
Ashland
and
president
of
Ashland
Distribution.
In
2008,
he
was
named
president
of
Ashland's
Global
Supply
Chain.
In
2008
and
2009,
he
also
led
the
development
and
execution
of
the
global
integration
strategy
related
to
the
Hercules
acquisition.
In
2011,
Harris
was
named
a
senior
vice
president
of
Ashland,
while
retaining
his
responsibilities
for
Performance
Materials
and
the
Global
Supply
Chain.
Immediately
prior
to
joining
Ashland,
Harris
served
as
general
manager
of
the
Food
Ingredients
Division
within
FMC's
Food,
Pharmaceutical
and
Personal
Care
Group
in
his
career
with
FMC
Corp.,
which
began
in
1992.
A
native
of
Philadelphia,
Pa.,
Harris
earned
a
bachelor's
degree
in
chemical
engineering
from
Lehigh
University.
He
also
holds
an
M.B.A.
from
the
Harvard
Graduate
School
of
Business
Administration.
Susan
B.
Esler,
Vice
President
and
Chief
Human
Resources
and
Communications
OfRicer,
Age:
51
Ms.
Esler
assumed
leadership
of
both
the
human
resources
and
corporate
communications
functions
of
Ashland
in
2
006.
She
is
responsible
for
the
global
management
of
all
aspects
of
human
resources,
including
talent
management
and
development,
compensation
and
beneMits,
and
labor
and
employee
relations.
Her
communications
responsibilities
include
corporate
and
Minancial
communications,
public
relations
and
business-‐to-‐business
marketing
communications.
She
joined
Ashland
in
1999
as
manager,
executive
compensation.
She
was
promoted
in
2001
to
director,
corporate
human
resources,
and
in
2002,
to
vice
president,
human
resources
programs
and
services.
In
2004,
she
became
vice
president,
human
resources,
and
in
2006,
communications
and
corporate
affairs
were
added
to
her
responsibilities.
She
was
named
to
her
current
position
of
vice
president
and
chief
human
resources
and
communications
ofMicer
in
2011.
Immediately
prior
to
joining
Ashland,
Esler
served
as
senior
director
of
compensation,
beneMits
and
HRIS
for
PepsiCo
Food
Systems.
She
held
various
HR
leadership
roles
within
the
PepsiCo
organization
starting
in1990.
Esler
has
also
been
employed
as
a
compensation
consultant
with
Mercer
and
started
her
working
career
at
Dow
Chemical
as
an
HR
specialist.
A
native
of
Pittsburgh,
Pa.,
Esler
is
a
graduate
of
Miami
University,
Oxford,
Ohio,
and
earned
her
master's
degree
in
business
administration
from
the
Weatherhead
School
of
Management
at
Case
Western
Reserve
University,
Cleveland,
Ohio.
Source:
Company
Website
78
Executive
OfMicers
(cont’d)
J.
William
Heitman,
Vice
President
and
Controller,
Age:
58
Mr.
Heitman
joined
Ashland
in
2008
with
more
than
30
years
of
Minancial
experience
in
various
industries,
including
automotive
and
chemicals.
As
vice
president
and
controller,
he
is
responsible
for
Ashland's
global
Minancial
accounting
and
reporting
processes,
including
oversight
of
accounting
policies
and
practices
and
external
and
internal
Minancial
reporting.
Previously,
Heitman
served
as
controller
for
the
$9
billion
North
American
Tire
operations
of
Goodyear
Tire
&
Rubber
Co.,
responsible
for
all
accounting
and
shared
services
for
North
America.
While
there,
he
was
a
key
contributor
to
the
signiMicant
restructuring
of
operations
and
implementation
of
an
enterprise
resource
planning
(ERP)
system
and
processes
related
to
Sarbanes-‐Oxley
compliance.
He
joined
Goodyear
in
2004
after
three
years
of
experience
in
the
chemical
industry
at
Ferro
Corp.,
where
he
served
as
vice
president
of
Minance
and
interim
chief
Minancial
ofMicer.
At
Ferro,
he
led
the
Minancial
integration
of
a
sizeable
global
acquisition
and
was
a
key
contributor
to
a
$500
million
debt-‐reduction
effort.
Heitman
was
also
vice
president
and
controller
for
Moen
Inc.,
where
he
spent
six
years.
Earlier
in
his
career,
he
held
numerous
Minancial
positions
during
a
16-‐year
tenure
with
TRW.
Heitman
earned
a
B.S.B.A.
degree
in
accounting
and
an
M.B.A.
in
Minance
from
Pittsburg
State
University,
Pittsburg,
Kan.
He
is
a
certiMied
public
accountant
and
a
member
of
the
Financial
Executives
Institute,
the
American
Institute
of
CertiMied
Public
Accountants
and
the
Ohio
Society
of
CPAs.
Steven
E.
Post,
Vice
President,
Operations
and
Environmental,
Health
and
Safety,
Age:
58
Steve
Post
is
responsible
for
Ashland's
global
manufacturing
operations
and
environmental,
health
and
safety
(EH&S)
activities.
Post
came
to
Ashland
in
2011
following
its
acquisition
of
International
Specialty
Products
Inc.
(ISP).
He
joined
ISP
in
1999
when
it
acquired
Monsanto's
alginates
business,
which
he
served
as
president.
Post
soon
became
ISP's
senior
vice
president
of
Operations,
managing
global
manufacturing,
which
included
18
production
facilities
and
engineering,
process
technology
and
environmental,
health,
safety
and
security
functions.
Prior
to
ISP,
Post
enjoyed
a
20-‐year
career
with
Merck,
holding
manufacturing
roles
of
increasing
responsibility
in
both
the
U.S.
and
Europe.
While
at
Merck,
he
gained
signiMicant
experience
in
the
production
of
specialty
polymers
derived
from
natural
raw
materials
and
fermentation
in
the
company's
Kelco
division.
Following
Monsanto's
acquisition
of
the
Kelco
division,
Post
worked
for
Mive
years
in
Monsanto's
nutrition
and
consumer
group
managing
manufacturing,
procurement
and
logistics,
engineering
and
EH&S,
prior
to
being
appointed
president
of
the
alginates
business.
A
native
of
Alliance,
Ohio,
Post
grew
up
in
Tempe,
Ariz.
He
holds
a
bachelor
of
science
in
chemical
engineering
from
Arizona
State
University
and
served
on
the
board
of
governors
of
the
Society
of
Chemical
Manufacturers
&
AfMiliates
(SOCMA).
Anne
T.
Schumann,
Vice
President
and
Chief
Information
and
Administrative
Services
OfRicer,
Age:
52
Ms.
Schumann
was
named
vice
president
and
chief
information
and
administrative
services
ofMicer
in
August
2009.
In
this
role,
she
holds
responsibility
for
Ashland's
global
information
technology
functions,
security
and
facilities
management.
Schumann
joined
the
company
in
2008
as
vice
president,
acquisition
integration,
at
the
time
Ashland
acquired
Hercules
Incorporated.
Previously,
she
served
as
Hercules'
vice
president
of
information
technology
from
2006,
with
responsibility
for
human
resources
added
in
2008.
She
joined
Hercules
in
2000
as
vice
president
of
the
Hercules
Shared
Services
Center.
Before
joining
Hercules,
Schumann
served
as
director
of
Minance
and
management
operations
for
Bryn
Mawr
College
near
Philadelphia,
Pa.
She
also
spent
11
years
with
ARCO
Chemical
Company,
holding
various
management
positions
in
Minance,
human
resources
and
global
business
operations.
She
began
her
career
in
1984
with
Continental
Illinois
National
Bank,
where
she
managed
corporate
banking
portfolios.
A
native
of
Chicago,
Ill.,
Schumann
earned
a
bachelor
of
science
in
environmental
biology
from
the
University
of
Illinois
and
an
M.B.A.
in
Minance
from
Indiana
University.
Walter
H.
Solomon,
Vice
President
and
Chief
Growth
OfRicer,
Age:
52
Ashland
vice
president
and
chief
growth
ofMicer
since
August
2005,
Mr.
Solomon
is
responsible
for
the
company's
enterprise
strategy.
His
team
has
mapped
Ashland's
transformation
from
a
U.S.
regional
oil
reMiner
into
a
global
specialty
chemical
company
and
leader
in
sustainable
chemistry.
Solomon
joined
Ashland
in
2002
as
senior
vice
president
and
general
manager
of
Ashland
Consumer
Markets'
(Valvoline)
Do-‐It-‐Yourself
business
unit.
While
in
that
role,
his
team
grew
proMitability
and
premium
lubricant
volume
each
year.
Prior
to
joining
Ashland,
Solomon
spent
20
years
growing
both
large
and
small
companies.
His
Mirst
10
years
were
in
a
series
of
brand
management
roles
with
Procter
&
Gamble,
ultimately
directing
marketing
in
P&G's
hair
care
and
juice
drink
businesses.
During
that
time,
Pantene*
grew
from
a
small,
boutique
brand
into
a
$100+
million
business
en
route
to
becoming
one
of
P&G's
billion-‐dollar
global
brands.
He
spent
the
next
10
years
leading
privately
funded
startup
companies
in
the
healthcare
and
software
industries,
including
an
Inc.
500*
company
and
an
internet
technology
incubator.
A
native
of
Charleston,
S.C.,
Solomon
has
served
as
president,
chairman
or
vice
chairman
of
the
board
of
trustees
of
four
not-‐for-‐proMit
organizations
and
as
a
board
member
for
six
others.
He
received
his
bachelor's
degree
in
commerce
from
the
University
of
Virginia.
Source:
Company
Website
79
Management
Compensation
• Compensation
Philosophy
- “seeks
to
align
executive
compensation
with
shareholder
value
on
an
annual
and
long-‐
term
basis
through
a
combination
of
the
following
types
of
compensation:
base
pay,
annual
incentive
compensation
awards
and
long-‐
term
incentive
compensation
awards
which
are
comprised
primarily
of
stock
appreciation
rights
(“SARs”)
and
Long
Term
Incentive
Plan
Awards
("LTIPs”)”
• Compensation
Heavily
Weighted
Towards
At
Risk
Long
Term
Incentive
Targets
- CEO:
target
of
Total
Direct
Compensation
(1)
that
is
at
risk
is
84%:
- 64%
to
long
term
incentives
- 20%
to
annual
incentives
- 16%
to
base
salary
-
is
an
average
of
70%:
Other
Executive
OfMicers
Total
Direct
Compensation
that
is
at
risk
- 44%
to
long-‐
term
incentives
- 26%
to
annual
incentives
- 30%
to
base
salary
Source:
Ashland
Proxy
dated
January
31,
2013.
(1) Total
Direct
Compensation
represents
the
sum
of
base
salary
+
target
annual
incentive
+
target
long-‐
term
incentive.
The
base
salary
is
the
only
Mixed
compensation
component.
At-‐
risk
compensation
is
equal
to
the
sum
of
target
annual
incentive
+
target
long-‐
term
incentive.
80
Board
of
Directors
BoD
is
currently
made
up
of
eleven
directors,
divided
into
three
classes.
81
Board
of
Directors
(cont’d)
Barry
W.
Perry,
Age:
66
Mr.
Perry
served
as
Chairman
and
Chief
Executive
OfMicer
of
Engelhard
Corporation
from
January
2001
to
June
2006.
Prior
to
this
position,
he
held
various
management
positions
with
Engelhard
Corporation
beginning
in
1993.
From
1991
to
1993,
Mr.
Perry
was
a
Group
Vice
President
of
Rhone-‐
Poulenc.
Prior
to
joining
Rhone-‐
Poulenc,
he
held
a
number
of
executive
positions
with
General
Electric
Company.
Mr.
Perry
holds
a
Bachelor
of
Science
degree
in
plastics
engineering
from
the
University
of
Massachusetts.
Mark
C.
Rohr,
Age:
61
Mr.
Rohr
is
Chairman
and
Chief
Executive
OfMicer
of
Celanese
Corporation,
a
technology
and
specialty
materials
company.
He
has
served
in
these
roles
since
April
2012.
Prior
to
this
position,
he
held
several
executive
positions
with
Albemarle
Corporation,
a
specialty
chemical
company,
including
Executive
Chairman
of
the
Board
(2011-‐
2012),
Chairman
of
the
Board
(2008-‐
2011),
Chief
Executive
OfMicer
(2002-‐
2011)
and
President
(2000-‐
2010).
Before
joining
Albemarle,
he
served
with
Occidental
Chemical
Corporation
as
Senior
Vice
President,
Specialty
Chemicals.
Mr.
Rohr
holds
Bachelor
of
Science
degrees
in
chemistry
and
chemical
engineering
from
Mississippi
State
University.
George
A.
Schaefer,
Jr.,
Age:
67
Mr.
Schaefer
served
as
Chairman
of
the
Board
of
Directors
of
Fifth
Third
Bancorp
and
Fifth
Third
Bank
headquartered
in
Cincinnati,
Ohio
until
June
2008.
Prior
to
this
position,
he
held
several
executive
positions
with
Fifth
Third
Bancorp
and
Fifth
Third
Bank,
including
Chief
Executive
OfMicer,
President
and
Chief
Operating
OfMicer.
Mr.
Schaefer
holds
a
Bachelor
of
Science
degree
from
the
U.S.
Military
Academy
at
West
Point
and
a
Masters
in
Business
Administration
from
Xavier
University.
82
Director
Compensation
Annual
Retainer
• an
annual
retainer
of
$90,000
for
each
director
• an
additional
annual
retainer
of
$20,000
for
the
Lead
Independent
Director
• an
additional
annual
retainer
of
$15,000
for
the
Chair
of
the
Audit
Committee
and
$9,000
for
Audit
Committee
members
• an
additional
annual
retainer
of
$10,000
for
other
Committee
Chairs
• Non-‐
employee
directors
may
elect
to
receive
part
or
all
of
each
retainer
in
cash
or
in
shares
of
Ashland
Common
Stock.
They
may
also
elect
to
have
a
portion
or
all
retainers
deferred
and
paid
through
the
Directors'
Deferral
Plan.
The
directors
who
make
an
election
to
defer
retainers
may
have
the
deferred
amounts
held
as
common
stock
units
(share
equivalents)
in
the
hypothetical
Ashland
Common
Stock
fund
or
invested
under
the
other
available
investment
options
under
the
plan.
The
payout
of
the
deferred
retainers
occurs
upon
termination
of
service
by
a
director.
Directors
may
elect
to
have
the
payout
in
a
single
lump
sum
or
in
installments
not
to
exceed
15
years.
For
deferrals
before
January
1,
2005,
upon
a
"change
in
control"
of
Ashland
(as
deMined
in
the
Directors'
Deferral
Plan),
amounts
in
the
directors'
deferral
accounts
will
be
automatically
distributed
as
a
lump
sum
in
cash
to
the
director.
For
deferrals
on
and
after
January
1,
2005,
distributions
for
such
deferrals
will
be
made
pursuant
to
each
director's
election
and
valued
at
the
time
of
the
distribution.
83
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