Croda: Could Ashland be Croda's next move?

Research evidence excerpt

Croda: Could Ashland be Croda's next move?

Barclays | Croda

i) Significant portfolio overlap in what Ancora describes as "high-margin, high-barrier

segments". As we discussed in our previous note, where we ran through Croda and Ashland's

portfolios at a high level, there are striking end-market similarities between the two companies

in the personal care ingredients and pharma excipients/life sciences end markets, which

account for ~70% of Ashland's portfolio. The two companies also have similar regional

exposures. Ancora considered Ashland's asset equivalents to Croda the company's "crown

jewels" which generate ~75-80% of EBITDA at high-20s margins. The remainder of Ashland's

portfolio consists of its Specialty Additives and Intermediates segments, which have some

overlap with Croda's Industrial Specialties; however, we don't consider this an area of focus for

Croda.

ii) Croda and Ashland reportedly engaged in merger talks in 2018. At the same time,

precedent engagement exists, with prior merger discussions between the two companies

suggesting that strategic fit, potential synergies and diligence considerations have already been

at least partially tested. These talks were terminated in February 2018, particularly due to

pressure at Ashland from the activist Cruiser Capital (private, not covered), which were

concerned that Ashland would undertake premature M&A activity before fixing its long-standing

problems that were identified at the time to be i) its excessive cost structure, ii) its inability to

achieve margin targets and iii) its anaemic EBITDA growth (See: British chemicals firm Croda

ends merger talks with Ashland).

FIGURE 1. Ashland 2025 sales mix by division FIGURE 2. Croda 2025 sales mix by division

5% Life Sciences Consumer Care

12%

35%

28% Personal Care