Filed
by Ashland Inc.
Questions
& Answers for Employees
We
know Ashland employees have many questions about the proposed acquisition of
Hercules. Here are responses to some of the most common questions. This document
will also be posted to FirstHand. As more information becomes available, we will
share it.
1.
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Why
are we acquiring Hercules?
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The
acquisition of Hercules fulfills our objective to create a leading specialty
chemicals company. Specifically, combining Ashland and Hercules:
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creates
a major, global specialty chemicals
company;
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significantly
enhances focus and expands scale in three specialty chemical businesses
with strong market positions and promising global growth
potential;
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boosts
Ashland’s revenues outside North America from $2.3 billion to
approximately $3.5 billion; and
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creates
leadership position in renewable/sustainable chemistries, with
approximately one third of estimated pro forma EBITDA coming from
bio-based chemistries.
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All these
benefits drive stronger, more profitable and less cyclical
earnings.
2.
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Can
you describe the two divisions of Hercules – Aqualon and Paper
Technologies and Ventures?
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Hercules’
Aqualon business is one of the most recognized and admired specialty chemical
brands in the world and brings Ashland a significant position in specialty
additives and ingredients, or materials that impart specific and controllable
properties or behavior such as coloring, thickening and
flavor-enhancing. They are used in industry to make everything from adhesives
and paints to building materials and even foods, pharmaceuticals and personal
care products.
Nearly
all of Aqualon’s additive products are water soluble polymers based on renewable
materials, enabling us to derive approximately one third of pro forma EBITDA
from bio-based or renewable chemistries. In addition, Hercules’ paper business
aligns well with Ashland’s water business. In fact, Hercules’ market-leading
position in paper bolsters Ashland’s participation in one of the world’s largest
industrial water treatment markets.
3.
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Are
we going to preserve Hercules’ valuable
brands?
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Absolutely.
Hercules’ brands are key assets of the business. They are among the strongest
and best-known brands in their respective markets, and it is our intention to
maintain and build upon this brand equity.
4.
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What
should we tell our customers?
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It’s
business as usual for customers. A customer letter has also been prepared and is
being distributed by our sellers globally.
5.
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What
about the work underway specific to improving ROS overall? Will those
plans change?
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This
transaction will actually accelerate the need to complete those projects. We
need to achieve two things to become a successful specialty chemicals company.
First, we need to achieve a minimum of 8% ROS for everyone except Distribution.
Second, we must improve our cash generation. These are two things we need to
accomplish this year.
6.
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What
are the plans to integrate the two
companies?
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Integration
of the companies is important to enable us to leverage both companies’ expertise
and to achieve economies of scale and other synergies. As for the specific
structures of our lines of business going forward, we do intend for our paper
and water technologies businesses to be operated as a single business entity.
Regarding the other businesses, it’s too early to comment on how they might be
combined. The integration team will be responsible for determining the best
opportunities for further integration of the two companies.
7.
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Can
you describe how Ashland Distribution or Valvoline will complement the
specialty chemicals core?
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Our
Ashland Distribution and Valvoline businesses provide complementary capabilities
and share similar markets with our specialty chemical businesses. Ashland
Distribution provides important channels to various end markets and logistics
efficiencies that enable more cost-effective operations globally. Valvoline
provides well-developed marketing capabilities in consumer markets and
innovative processes to develop better products and solutions for our customers.
As such, they are valued, complementary adjacencies to our new specialty
chemicals core businesses.
8.
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Are
we going to combine the management teams of the two companies? Should we
expect headcount reduction where there is
overlap?
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We are
pleased that the presidents of Aqualon (John Panichella) and Hercules Paper
(Paul Raymond) will remain with the businesses and join Ashland’s senior
management team. Our intent is to integrate Ashland’s Water Technologies
business with Hercules’ Paper Technologies and Ventures business, creating one
global, $2 billion paper and water technologies business, led by Paul Raymond.
As our integration team looks at all the businesses of the two companies, it
would be natural to explore other synergy opportunities where consolidating and
integrating may make sense.
9.
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Will
any of our facilities be impacted?
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The
integration team will be responsible for determining the best opportunities for
the integration of these two companies.
10.
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Will
there be changes to our benefits, 401K, pension or
compensation?
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There are
no changes to our current Total Rewards program as a result of the transaction,
including pay, benefits, incentives, etc. Part of the integration team’s work
will be to decide whether any changes will be required to the Total Rewards
structure for the combined company. Any changes will be communicated in as
timely a manner as possible.
11.
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Will
Hercules be moving their headquarters to
Covington?
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Covington
will remain the headquarters for the combined company. We do, however, expect to
maintain a significant presence in Wilmington, Del.
12.
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Are
we changing the name of Ashland?
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No.
13.
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When
will the transaction close?
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We expect
the transaction will close by the end of calendar 2008.
14.
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How
will I find out more information?
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We will
post new information and updates on FirstHand, within the middle “Ashland News”
section, as well as include all acquisition-related information under a new tab
on “The Bulletin Board” section of the site.
15.
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What
are the rules between now and the transaction’s closing? Should I do/not
do anything?
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It's
business as usual for employees. However, the general rule is that Ashland
and Hercules remain independent businesses and must treat one another as
competitors until the closing date. There can be no discussions,
agreements, understandings, or exchanges of information that would eliminate or
reduce competition between Ashland and Hercules before the deal is
completed.
For more
information, or assistance on particular issues, contact Frank Jumelet at
614-790-5242, Mark
Stach at 614-790-6422, Diana McCune at 614-790-3787, Matthew McWhorter at
614-790-3398 or Tom Davis at 614-790-3814. The Antitrust Guidelines are also
posted on FirstHand and can be downloaded for your reference. It is also
available through the Law department.
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 and Hercules’
current expectations about the acquisition of Hercules. Although Ashland and
Hercules believe their expectations are based on what management believes to be
reasonable assumptions, they cannot assure the expectations reflected in this
document will be achieved as they are subject to risks and uncertainties that
are difficult to predict and may be outside of Ashland’s and Hercules’ control.
These risks and uncertainties may cause actual results to differ materially from
those stated, projected or implied. Such risks and uncertainties include the
possibility that the benefits anticipated from the Hercules transaction will not
be fully realized; the possibility the transaction may not close, including as a
result of failure to obtain the approval of Hercules stockholders; the
possibility that financing may not be available on the terms committed; and
other risks that are described in filings made by Ashland and Hercules with the
Securities and Exchange Commission (SEC) in connection with the proposed
transaction. Other factors, uncertainties and risks affecting Ashland and
Hercules are contained in each company’s periodic filings made with the
Securities and Exchange Commission, including Ashland’s Form 10-K for the fiscal
year ended Sept. 30, 2007, Ashland’s Form 10-Q for the quarter ended March 31,
2008, Hercules’ Form 10-K for the fiscal year ended Dec. 31, 2007, and Hercules’
Form 10-Q for the quarter ended March 31, 2008 filed with the SEC and available
on Ashland’s Investor Relations website at www.ashland.com/investors or
Hercules’ website at www.herc.com or the SEC’s website at www.sec.gov. Ashland
and Hercules undertake no obligation to subsequently update or revise the
forward-looking statements made in this document to reflect events or
circumstances after the date of this document.
Additional
Information
In
connection with the proposed transaction, Ashland and Hercules will be filing
documents with the SEC, including the filing by Ashland of a registration
statement on Form S-4, and the filing by Hercules of a related preliminary and
definitive proxy statement/prospectus. Investors and security holders are urged
to read the registration statement on Form S-4 and the related preliminary and
definitive proxy/prospectus when they become available because they will contain
important information about the proposed transaction. Investors and security
holders may obtain free copies of these documents (when they are available) and
other documents filed with the SEC at the SEC’s web site at www.sec.gov and by
contacting Ashland Investor Relations at (859) 815-4454 or Hercules Investor
Relations at (302) 594-7151. Investors and security holders may obtain free
copies of the documents filed with the SEC on Ashland’s Investor Relations
website at www.ashland.com/investors or Hercules’ website at www.herc.com or the
SEC’s website at www.sec.gov.