CORRECTED-UPDATE 1-Ashland investor says halt Valvoline spinoff, sell specialty arm

(Corrects paragraph 3 to say the multiple at which the entire
company trades, not just the specialty chemicals arm. Corrects
paragraph 12 that the projected stock price refers to Ashland,
not Valvoline.)
By Michael Flaherty
Jan 20 (Reuters) - One of Ashland Inc's ASH.N largest
shareholders is urging the chemical maker to halt plans to spin
off its Valvoline business and instead seek a buyer for its
specialty chemicals unit, according to a slide presentation
obtained by Reuters.
Elmrox Investment Group LLC, which says it owns more than
$100 million in Ashland stock, said Valvoline would be more
valuable as a stand-alone company and suggested it be structured
as a master limited partnership.
As for the specialty chemicals arm, which makes compounds
that go into personal care products, pharmaceuticals, and energy
industry fluids, Elmrox says the division could be acquired for
roughly twice the multiple the entire company currently
commands.
Elmrox cited the proposed merger of DuPont (N:DD) DD.N and Dow
Chemical DOW.N as an example of industry consolidation.
The hope is for Ashland shareholders to collect some
change-in-control premium while the "iron is hot", Don Bilson,
head of event-driven research at Gordon Haskett, wrote in a
research note.
"That said, we don't see the market for chemical deals to be
red hot at the moment," Bilson said in the note.
Last year, Ashland said it would spin off Valvoline, its
engine lubricants unit, into a publicly traded company, as it
seeks to shed assets that are not part of its core specialty
chemicals business.
The spinoff would help mark the final step in Ashland's
decade-long shift from an oil refiner to a specialty chemicals
maker, the company said in September.
Prior to Elmrox's push for change, which includes suggesting
the company grant the investor representation inside its board
room, activist Jana Partners had targeted Ashland.
Jana bought a 7.4 percent stake and pushed for changes in
the company's structure and better capital returns, a campaign
that helped lead to sales of several non-core businesses. Jana
sold its stake early last year, according to filings.
Shares of Ashland, based in Covington, Kentucky, fell 1.5
percent to $94.76 on the New York Stock Exchange on Wednesday.
Elmrox says in its presentation that if Valvoline, which
makes motor oil and automotive chemicals and also operates
retail repair shops, was structured as a master limited
partnership and the chemicals business sold, Ashland investors
could see total value of more than $250 per share.
Elmrox's founder, Daniel Lawrence, said the firm thinks
highly of Ashland CEO William Wulfsohn, according to the Wall
Street Journal, which first reported the investor's move.