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Ashland Will Aquire Hercules

Posted: July 11, 2008

Ashland Inc. has entered into a definitive agreement to acquire Hercules Inc. The total transaction value is approximately $3.3 billion, or $23.01 per Hercules share, based on Ashland's July 10, 2008, closing stock price and including $0.7 billion of net assumed debt. The transaction, which would create a major, global specialty chemicals company, is expected to close by the end of calendar 2008. Both companies manufacture specialty chemicals.

"The acquisition of Hercules fulfills our objective to become a leading specialty chemicals company," says James J. O'Brien, Ashland chairman and CEO. "It creates a defined core for Ashland composed of three specialty chemical businesses with strong market positions and promising global growth potential: specialty additives and ingredients, paper and water technologies and specialty resins. In addition, we expect our financial profile to be enhanced significantly through reduced earnings volatility, improved profitability and stronger cash flow generation.

Hercules' Aqualon business will offer Ashland a significant market position in rheology modifiers. Nearly all of Aqualon's additive products are water-soluble polymers derived from renewable materials. The combined company generates, on a pro forma basis, approximately one-third of EBITDA from bio-based or renewable chemistries. Ashland expects to realize annualized run-rate cost savings of at least $50 million by the third year following the transaction's close by eliminating redundancies and capturing operational efficiencies. In the first year following the transaction's close, while the combination is modestly dilutive to earnings per share on a reported basis, it is expected to be significantly accretive to Ashland's earnings per share excluding merger costs and noncash depreciation and amortization charges resulting from the transaction.

John Panichella, president of Hercules' Aqualon Group, and Paul Raymond, president of Hercules' Paper Technologies and Ventures Group, have agreed to join Ashland after the close of the transaction. In addition, Ashland will maintain a significant presence in Wilmington, Delaware., U.S., where Hercules is headquartered.

The merger is conditioned upon, among other things, the approval of Hercules' shareholders, the receipt of regulatory approvals and other customary closing conditions. Assuming the satisfaction of these conditions, the transaction is expected to close by the end of calendar 2008.