The new company’s HQ will be in Cambridge, MA and GCP ‘will be a leading global provider of products and technology solutions for customers in the specialty construction chemicals, specialty building materials, and packaging sealants and coatings industries.’ Sales are expected to be around $1.5b annually and it is expected to generate significant cash flow. Grace’s current CEO, Fred Festa, will be joining the new company which is always something interesting to note.
Post-spin, the new Grace is expected to generate ~$1.8 in revenue and here is what it will look like:
Grace will consist of the company’s existing Catalysts Technologies and Materials Technologies operating segments, excluding the Darex Packaging Technologies business. The company will continue to be a global leader in process catalysts and specialty silicas, and a high margin, technologically advanced business focused on sales and earnings growth, strong cash flow, and high returns on capital.
The spinoff will begin a new chapter in the 161 year old company’s storied history. Unfortunately, the company is probably best known now for its asbestos-laden products whose related liabilities ultimately led to over a decade spent in Chapter 11, one of the longest bankruptcies in history. The company emerged from bankruptcy in February 2014 and just a year later announced plans for the spinoff. The WSJ had a nice piece outlining the evolution of the breakup idea with insights from the CEO. While the discussion includes numerous factors, it seems a key point was that analysts seemed focused on only one piece of the business which would just so happen to earn a much higher multiple. Why not focus there?
The separation is expected to be completed during Q1 of 2016 with Grace shareholders receiving 1 share of GCP Applied Technologies for each GRA share owned.
Disclosure: Author holds no position in any stock mentioned.