Ashland to acquire Hercules for $2.6 billion

By Euan Rocha

NEW YORK (Reuters) - Ashland Inc (ASH.N), which makes chemicals and Valvoline motor oil, said on Friday that it would acquire Hercules Inc HPC.N in a $2.6 billion cash-and-stock deal that would significantly boost its product offerings.

The acquisition would give Ashland a major presence in the water treatment arena that primarily services the pulp and paper industry. It would also increase the company's portfolio of specialty additives and ingredients.

Under the deal, Ashland would pay $18.60 in cash and 0.093 of a share for each Hercules common share.

Based on closing stock prices on Thursday, the transaction values Hercules at $2.6 billion, or $23.01 a share, a 38 percent premium. Including net assumed debt, the deal is worth $3.3 billion.

The news pushed shares in Ashland shares down nearly 16 percent to $39.99 on the New York Stock Exchange, while Hercules climbed more than 24 percent to $20.68.

Despite the drop in Ashland shares, Jefferies & Co analyst Laurence Alexander praised the link-up of the two companies.

"We view the deal as incrementally positive insofar as the acquisition does not entail significant restructuring requirements at Hercules," Alexander said in a note to investors.

The deal comes a day after Dow Chemical Co (DOW.N) said it would acquire specialty chemical maker Rohm and Haas Co ROH.N for $15.3 billion in an all-cash transaction.