Ashland Inc. to acquire Hercules Inc.

Kentucky-based chemical company Ashland Inc. said Friday it will acquire Hercules Inc. in a $2.6 billion cash-and-stock deal.

Under the agreement, Ashland would acquire all the outstanding shares of Hercules at a price that would represent a 38 percent premium over the Thursday closing price of Hercules stock. The companies value the deal at about $3.3 billion, including the assumption of $700 million of debt.

Covington, Ky.-based Ashland is a manufacturer of specialty chemicals, a distributor of chemicals and plastics, and provides automotive lubricants, car-care products and quick-lube services. Wilmington, Del.-based Hercules is one of the world's leading suppliers of specialty chemicals to the pulp and paper industry.

The acquisition boosts Ashland's position in the pulp and paper business, the company said. The combined businesses will also provide additional opportunities in other key water treatment markets, Ashland said, including municipal, industrial and marine.

Ashland expects to realize annualized cost savings of at least $50 million by the third year following the close of the deal, which is expected by the end of 2008.