W.R. Grace Applies New Name To Spinoff: GCP Applied Technologies

W.R. Grace & Co (GRAfiled an initial Form 10 for its upcoming construction products and packaging technologies segment. The new company will be called GCP Applied Technologies and the name refers to Grace Construction & Packaging. In fact, the press release notes that many customers still refer to the business today as ‘GCP’. Of course, the company couldn’t escape the trend of ‘buzzy’ new names entirely though as it felt compelled to add in the words ‘Applied Technologies’ in order to express ‘two important dimensions of the value we deliver to our customers—innovative technologies that are highly practical and linked to results for our customers.’

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.