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
EMPLOYEE Q&A
ASHLAND INC. AGREES TO TRANSFER INTEREST IN MAP TO
MARATHON OIL CORPORATION IN TAX-FREE TRANSACTION
"QUESTIONS & ANSWERS"
BUSINESS INTERESTS:
Q: HIGH LEVEL, WHAT ARE THE DETAILS OF THE TRANSACTION?
A: Ashland Inc. has signed an agreement under which Ashland will transfer
its 38 percent interest in Marathon Ashland Petroleum LLC (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.
Q: WHAT WILL THIS DEAL MEAN TO SHAREHOLDERS?
A: Under the terms of the agreement, Ashland's shareholders would receive
Marathon common stock with a value of approximately $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.
Q: THIS TRANSACTION IS SUBJECT TO SEVERAL CONDITIONS BEFORE IT COULD BE
COMPLETED. WHAT ARE THE CONDITIONS?
A: The transaction is subject to, among other things:
o Approval by Ashland's shareholders;
o Customary antitrust review;
o Consent of public debt holders; and
o Receipt of a favorable private letter ruling from the Internal
Revenue Service with respect to the tax treatment of the
transaction.
Q: HOW DOES THIS TRANSACTION COMPARE TO GOING FORWARD WITH THE CALL
PROVISION UNDER THE EXISTING JOINT VENTURE CONTRACT?
A. Beginning January 1, 2005, MAP has the right to call our interest at a 15
percent premium to fair market value. While we are comfortable with our
rights under the joint-
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venture contract, we felt it was in the best interest of our
shareholders to structure a tax-free transaction. Given that our tax
basis in MAP is about $1.2 billion, a cash call would create a very
large tax liability. The federal capital gains rate for corporations is
35 percent. Additionally, the gain would be taxable at the state level.
Because this transaction is tax free, it offers the best value for
Ashland and our shareholders.
Q: WHAT WILL HAPPEN IF THE TAX RULINGS OR OTHER CONDITIONS FALL THROUGH AND
WE HAVE TO ABANDON THIS DEAL?
A. We will be back to where we started, operating under the joint-venture
agreement, with which we are very comfortable. We cannot address what
Marathon might otherwise do.
Q: SHOULD THE TRANSACTION CLOSE, WHAT WOULD WE DO WITH THE PROCEEDS FROM THE
TRANSACTION?
A: The primary use of the proceeds from this transaction will be used to
reduce debt. It is not our intention to use the proceeds to repurchase
stock or to pay a special dividend, which is consistent with preserving
the tax advantages of the transaction.
Q: HOW WILL THIS CHANGE OUR ACQUISITION STRATEGY? WHAT WILL BE OUR CRITERIA
FOR ACQUISITIONS?
A: It is our intention to remain disciplined and patient in our investment
approach. You may have noticed that Ashland has made essentially no
acquisitions since Jim O'Brien became CEO. This is partially due to the
fact that we have decided to improve our internal processes before
investing more of our shareholders' funds.
We won't relax our new 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.
Through a process-centered approach, we will continue to identify and
invest in high return opportunities to increase growth and improve
returns.
To the extent we consider acquisitions, we will again focus on our core
businesses and investing in adjacencies to them. Any acquisition will
need to pass a rigorous screening of whether the synergies justify the
price and whether we can easily integrate existing systems and processes.
Using those standards, our focus will most likely be on modest-sized
acquisitions. However, I don't want to totally rule-out larger
transactions if something compelling were to be identified.
Q: WHY ARE WE INCLUDING OUR MALEIC ANHYDRIDE PLANT AND 61 OF THE VALVOLINE
INSTANT OIL CHANGE (VIOC) CENTERS IN THIS TRANSACTION?
A: In order to structure a tax-free spin-off, Ashland needed to include
active trades or businesses. Under IRS guidelines, MAP may not qualify
because it is a joint venture. The maleic anhydride business and
Valvoline Instant Oil Change centers were mutually chosen because they
are complementary to Marathon's business.
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Q: WHAT ARE OUR COMMERCIAL RELATIONSHIPS WITH MAP?
A: 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.
Q: WOULD THE CLOSING OF THIS TRANSACTION HAVE ANY EFFECT ON THE NEVILLE
ISLAND FACILITY?
A: No. Approximately 1/3 of the Neville Island facility was used for maleic
production. That portion of the facility is currently mothballed. The
remainder of the facility will continue to be used for production of
unsaturated polyester resins and will remain part of Ashland. [Note:
Neville Island will remain part of Ashland.]
Q: PRIOR TO THE CLOSING OF THE TRANSACTION, WILL MAP CONTINUE TO MAKE ITS
QUARTERLY DISTRIBUTIONS TO ASHLAND?
A: MAP will not make quarterly cash distributions to Ashland and Marathon
between now and the closing of this transaction. As a result, the final
amount received by Ashland would be increased by an amount equal to 38
percent of the cash accumulated from operations during the period prior
to closing.
Q: WHY DIDN'T WE WAIT FOR MARATHON TO CALL FOR OUR SHARES? WOULDN'T THIS
HAVE RESULTED IN A BETTER PRICE?
A: As you are aware, under the terms of our current joint-venture agreement
with Marathon, beginning January 1, 2005, Marathon has the right to call
our interest in MAP at a 15 percent premium to fair market value.
However, a call would have been a taxable transaction. We felt it was in
the best interest of our shareholders to structure a tax-free
transaction. Because this transaction is tax free, it offers the best
value for Ashland and our shareholders.
Q: WHY ARE WE DOING THIS NOW?
A: This transaction, if concluded successfully, will eliminate the
uncertainty around the future of our ownership interest in MAP. The
events of today are another step toward accomplishing the goals
established in Jim O'Brien's 8-point profitability improvement plan,
published in October of 2002.
EMPLOYEE INTERESTS
Q: WHAT IS THE INTEGRATION PLAN AND HOW LONG WILL IT TAKE?
A: We do not have a tremendous amount of information to communicate today,
but here is what we do know. All affected Ashland and Michigan/Northwest
Ohio Valvoline Instant Oil Change (VIOC) center employees would remain
Ashland employees until the transaction closes. We anticipate the
transaction to close by the end of the 2004 calendar
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year. Until that time, operations will proceed as normal and we trust
all employees will continue to perform at the same high levels as they
have always performed.
As information becomes available, we will communicate what, if any,
changes happen as a result of the closing.
Q: WILL ALL AFFECTED ASHLAND AND VALVOLINE EMPLOYEES HAVE JOBS AT MARATHON?
A: It is Marathon's intent to employ all active employees in both operations
once the transaction is complete.
Q: WHAT ABOUT THE BARGAINING UNIT EMPLOYEES AND UNION REPRESENTATION?
A: Marathon representatives will contact PACE officials at the appropriate
time.
Q: WILL AFFECTED EMPLOYEES RETAIN EXISTING COMPENSATION AND BENEFITS PLANS?
A: Transition teams will be formed to discuss these issues. Full details on
compensation and benefits programs would be provided as soon as they are
available from Marathon, but no later than the official close of the
transaction. In the meantime, compensation and benefits programs will
continue to be administered as they normally would by Ashland.
Q: WHEN WILL WE HEAR MORE FROM ASHLAND OR MARATHON?
A: Ashland and Marathon will be formally communicating information
periodically throughout the 2004 calendar year. Prior to closure of the
transaction, a series of site visits are planned to provide more complete
information on pay, benefits and other terms of employment with Marathon.
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
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proxies in connection with the transaction referenced in the foregoing
information by reading the proxy statement/prospectus when it becomes
available.
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