Ashland [NYSE:ASH] is working with Citi as it explores a sale of its Nutraceuticals business, four sources familiar with the situation said.

The company is expected to collect initial bids next week, two of the sources said.

In November, while announcing its fiscal 2023 4Q and full-year earnings the Wilmington, Delaware-based specialty chemicals producer said it plans to initiate a portfolio optimization program to help improve profitability. As part of that, Ashland said it was commencing the divestiture process for its Nutraceuticals business, which is listed under the product category Health, Wellness and Nutraceuticals.

Financial sponsors are expected to be primary buyers of the Nutraceuticals business, three of the sources said. These sources noted the business generates between USD 10m to USD 20m in EBITDA. The seller has made a broad reach, some of the sources noted.

In the event of a sale, the business is expected to fetch a high single-digit valuation, three of the sources noted.

Mergermarket reported that German chemicals company BASF [ETR:BAS] had hired Rothschild for the sale of its Illertissan nutraceuticals business.

Ashland CEO Guillermo Novo said that the company was ‘’pleased’ with the Nutraceuticals team’s efforts to strengthen and grow the business. “However, we have determined that it is not core to Ashland’s business model or longer-term strategy. As we saw with the sale of our Adhesive business, we believe Nutraceuticals will be better positioned to thrive as part of an organization where Nutraceuticals is a core to their model and future investment strategy,” he added.

In addition to the divestiture of its Nutraceuticals business, Ashland plans to take other actions, including optimization and consolidation of its carboxymethyl cellulose (CMC) and methyl cellulose (MC) industrial businesses and related capacity to improve productivity and mix and increasing resources and investments to drive its higher-value “globalize and innovate” strategy, according to its press release.

Ashland expects these portfolio actions to result in improved adjusted EBITDA margins of approximately 200 bps and returns on net assets of 150 to 200 bps. The impact of these portfolio actions is expected to reduce annual sales by approximately USD 200m to USD 225m.

The company has a market cap of USD 4.2bn. It reported an adjusted EBITDA of USD 459m for the full year, down 22% from USD 590m in the prior year. Adjusted EBITDA margin decreased to 21%, a 380 bps decrease compared to the prior year, according to an 8 November press release.

Ashland and Citi did not respond to requests for comment.