FILED BY ASHLAND INC. PURSUANT TO RULES 165 AND 425 PROMULGATED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND DEEMED
FILED PURSUANT TO RULE 14A-12 PROMULGATED UNDER THE
SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.
SUBJECT COMPANY: ASHLAND INC.
COMMISSION FILE NO.: 001-02918
March 19, 2004
Dear Ashland Associates,
Earlier today, we announced in a news release that Ashland has signed an
agreement under which Ashland will transfer its 38 percent interest in MAP and
two other businesses to Marathon Oil Corporation in a transaction structured to
be tax free and valued at approximately $3.0 billion. The two other businesses
are Ashland's maleic anhydride business and 61 Valvoline Instant Oil Change
(VIOC) centers in Michigan and northwest Ohio, which are valued at $94 million.
Under the terms of the agreement, Ashland shareholders would receive Marathon
common stock with a value of $315 million (or approximately $4.50 per Ashland
share based on the number of shares currently outstanding). Ashland would
receive cash and MAP accounts receivable totaling $2.7 billion.
The transaction is subject to, among other things, approval by Ashland
shareholders, customary antitrust review, consent from public debt holders and
receipt of a favorable private letter ruling from the IRS with respect to the
tax treatment of the transaction. There is meaningful risk that the
transaction will not receive the favorable ruling from the IRS, in which case
the transaction would not proceed. However, we believe it is more likely than
not that this transaction will receive a favorable ruling. If these conditions
are met, the transaction is expected to close by the end of the 2004 calendar
year.
If concluded successfully, this transaction will eliminate the uncertainty
around the future of our ownership interest in MAP. The transfer of our
interest in MAP fits our strategy of transforming the fundamental performance
and financial dynamics of Ashland.
POSITIONING ASHLAND FOR THE FUTURE
I view the events of today as another step toward accomplishing the goals I
established in October 2002, through my eight-point profitability improvement
plan. We have been successful
because we have worked hard, we have worked as a team, and we have tried to
uncover new and better ways of running our businesses. We have much to be
proud of:
o Through our Top-Quartile Cost Structure program, we have worked to reduce
certain selling, general and administrative costs down by a rate of $100
million in 2004.
o In an effort to improve returns, Ashland Distribution has restructured
nearly everything about its operations, improving sales revenues by 11
percent in 2003, and they continue to grow.
o Our Ashland Paving And Construction division has improved it results
significantly during the first quarter of this fiscal year, and we expect
our restructuring and cost-reduction efforts will have a continued,
positive effect on the division's performance.
o To improve organizational effectiveness, we have implemented a process-
centered approach to how we operate. Last month, we introduced our new,
unified business platform, which positions our four wholly-owned
divisions into two primary cores: Chemicals and Transportation
Construction.
o We have a continuing process to review our portfolio and optimize our
business mix. This resulted in the sale of our Electronic Chemicals
business in 2003, which is a great business but one we felt would
generate more value to our shareholders if it was monetized.
o Since 2002, we have reduced total debt by $233 million and increased cash
by $111 million.
o When the profitability improvement plan was announced, I shared our
strategy to expand in existing or adjacent markets. The changes that we
have made in the past year have positioned us well for the future.
o And finally, we promised to capture value from MAP. Since that time, we
have dedicated substantial resources to this matter, and we believe this
transaction provides the highest value for Ashland and our shareholders.
MAINTAINING OUR FOCUS
I would imagine that everyone has many questions on their minds right now, some
of which we may not be able to answer right away. Here are three top-of-mind
questions that have been on my mind and that I'd like to answer for you now:
FIRST, WHAT WILL WE DO WITH ALL THAT MONEY? The primary use of the proceeds
from this transaction would be to reduce debt. It is not our intent to use the
proceeds to repurchase stock or pay a special dividend. We will remain very
disciplined and patient in our investment approach. We will not relax our
standards just because we find ourselves with a large amount of cash and little
or no debt. The central focus of our reinvestment strategy will be on organic
growth in our core businesses.
SECOND, WHAT WILL HAPPEN TO OUR COLLEAGUES WHO WILL BECOME MEMBERS OF MARATHON
UPON CLOSING OF THE TRANSACTION? First, it is Marathon's intent to employ all
active employees in both operations once the transaction is complete. In
addition, we expect our very productive relationships with MAP and Marathon to
continue and, in fact, to grow. MAP is currently a supplier to our Valvoline,
APAC and chemical distribution divisions, selling us lube stocks, asphalt and
solvents. MAP is also a customer for packaged products from Valvoline and water
treatment chemicals provided by our Specialty Chemical division. And finally,
MAP would
become the sole supplier of maleic anhydride for our domestic unsaturated
polyester resin business and would become our largest VIOC franchisee.
THIRD, ARE WE READY FOR THIS? While preparation is 80 percent of the game, it's
execution that puts points on the scoreboard. We have spent the past 17 months
studying the competition, learning our real strengths, and planning how to
succeed. We have re-written our playbook. Now we are ready to take action - to
execute! Flexibility and speed will be key to our success.
I know we have what it takes to win. When Ashland wins, our whole team wins.
This is our time, and I believe we're ready. So, let's execute, and let's do it
as one unbeatable Ashland team.
All the best,
Jim
FORWARD-LOOKING STATEMENTS
This document contains forward-looking statements, within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. These statements include those that refer to Ashland's
operating performance and expectations about this transaction, including those
statements that refer to the expected benefits of the transaction to Ashland's
shareholders. Although Ashland believes its expectations are based on
reasonable assumptions, it cannot assure the expectations reflected herein will
be achieved. These forward-looking statements are based upon internal forecasts
and analyses of current and future market conditions and trends, management
plans and strategies, weather, operating efficiencies and economic conditions,
such as prices, supply and demand, cost of raw materials, and legal proceedings
and claims (including environmental and asbestos matters) and are subject to a
number of risks, uncertainties, and assumptions that could cause actual results
to differ materially from those we describe in the forward-looking statements.
The risks, uncertainties, and assumptions include the possibility that Ashland
will be unable to fully realize the benefits anticipated from the transaction;
the possibility of failing to receive a favorable ruling from the Internal
Revenue Service; the possibility that Ashland fails to obtain the approval of
its shareholders; the possibility that the transaction may not close or that
Ashland may be required to modify some aspect of the transaction to obtain
regulatory approvals; and other risks that are described from time to time in
the Securities and Exchange Commission reports of Ashland. Other factors and
risks affecting Ashland are contained in Ashland's Form 10-K for the fiscal
year ended Sept. 30, 2003, filed with the Securities and Exchange Commission
(SEC) and available in Ashland's Investor Relations website at
www.Ashland.com/investors or the SEC's website at www.sec.gov. Ashland
undertakes no obligation to subsequently update or revise the forward-looking
statements made in this news release to reflect events or circumstances after
the date of this release.
ADDITIONAL INFORMATION ABOUT THIS TRANSACTION
Investors and security holders are urged to read the proxy
statement/prospectus regarding the proposed transaction when it becomes
available because it will contain important information. The proxy
statement/prospectus will be filed with the SEC by Ashland, and security
holders may obtain a free copy of the proxy statement/prospectus when it
becomes available, and other documents filed with the SEC by Ashland, at the
SEC's website at www.sec.gov. The proxy statement/prospectus, and other
documents filed with the SEC by Ashland, may also be obtained for free in the
SEC filings section on Ashland's Investor Relations website at
www.Ashland.com/investors, or by directing a request to Ashland at 50 E.
RiverCenter Blvd., Covington, KY 41012. The respective directors and executive
officers of Ashland and other persons may be deemed to be participants in the
solicitation of proxies in respect of the proposed transaction. Information
regarding Ashland's directors and executive officers is available in its proxy
statement filed with the SEC by Ashland on December 8, 2003. Investors may
obtain information regarding the interests of participants in the solicitation
of proxies in connection with the transaction referenced in the foregoing
information by reading the proxy statement/prospectus when it becomes
available.