Greater Cincinnati stands to lose another Fortune 500 company as Covington-based Ashland Inc. plans to split itself in half.
The specialty chemical maker announced Tuesday it will split into two companies – with its Valvoline motor lubricants unit becoming a stand-alone business.
While the move may not affect the company’s 65 local employees, it will likely reduce the region’s roster of Fortune 500 companies from nine to eight.
The region had 10 Fortune 500 companies in June when the financial magazine published its closely-watched list this summer.
Another of those companies disappeared in August after Rhode Island-based CVS Health closed on its $12.9 billion takeover of Downtown-based Omnicare. A week later, it disclosed it would cut 232 out of nearly 600 existing local jobs.
Local officials and experts said the shrinking number of Fortune 500 companies hurts the region, but it is hard to quantify the impact.
“One of our biggest losses comes when an area company drops out of the Fortune 500, because that it what we boast about to other regions,” said Trey Grayson, president of Northern Kentucky Chamber of Commerce. “But Valvoline was based in Lexington, anyway, and the split wasn’t a surprise to anyone.”
Michael Jones, a labor economist with the University of Cincinnati, said the deal doesn’t look like it will have a tremendous impact on local employment.
“It looks like we’re losing some bragging rights,” Jones said.
Jones said the region rightly covets keeping headquarters of major corporations because they can attract clusters of high-paying jobs. For example, he noted competitors of Procter & Gamble have offices in the region because they know they can easily find high-caliber consumer products workers here.
“There’s a spillover effect from all these high-profile headquarters,” Jones said.
Ashland officials say it’s too early to say how its local jobs might be affected by the split, but noted the company just extended its lease at RiverCenter.
Grayson added that since the Covington location will be unaffected otherwise, “We’re still really glad to have them in the region and they are still a great employer and great corporate citizen.”
Valvoline to be based in new space in Lexington
Ashland’s change comes after a strategic review of the company, which employs 10,000 worldwide. The company said it allows two very different divisions to go their separate ways.
Executives envision a smaller Ashland that generates $3.6 billion in revenues from specialty chemicals and will remain headquartered locally.
Valvoline, which does $2 billion a year in business, will be based in Lexington, where it is constructing new office space, as previously announced this summer.
Ashland chief executive William A. Wulfsohn will lead the new Ashland. Sam Mitchell, currently president of Valvoline, will be the new company’s CEO.
Ashland officials said the separation would be tax-free and its investors will end up holding shares in both companies, which are expected to pay regular dividends.
Wall Street investors embraced the proposal, sending Ashland stock up $2.78, or 2.6 percent, to close at $108.50 Tuesday.
Ashland expects the split to occur in about a year and promised more details of the transaction at its November investor conference. The split is the latest in a flurry of nearly 50 acquisitions and divestitures that have transformed the company from an oil refiner to a supplier of value-added products for customers in industries such as construction and pharmaceuticals.
Last year, it sold its water-technologies business to private equity firm Clayton Dubilier & Rice LLC for $1.8 billion.
That sale came after activist investor Jana Partners LLC bought a stake in 2013. Jana has since sold down its interest to less than 1 percent.
Valvoline currently ranks as the second-largest quick-lube chain and the No. 3 passenger car motor oil brand in the United States.
The brand operates and franchises approximately 940 Valvoline Instant Oil Change service centers nationwide.
Besides operating the Valvoline business, Ashland makes chemical additives and ingredients that do everything from whiten teeth in toothpaste and reduce split ends in shampoo to strengthen blades on wind turbines.
Founded in eastern Kentucky, Ashland moved its headquarters in 1998 from the city that gave it its name to the Cincinnati region. It currently ranks 371st on the Fortune 500 list.
The company employs 1,750 employees in Kentucky and 1,600 in Ohio.
Together, these two sets of workers represent roughly 32 percent of Ashland’s total employee base of 10,000-plus workers and 48 percent of its national employee base.
This article originally appeared on Cincinnati.com
