Sources: W.R. Grace & Co., Columbia, Md., CP Staff
Directors have approved a plan to separate Grace into two independent, publicly traded companies, each with interim designations: New GCP, spanning concrete admixtures- and cement additives-anchored Grace Construction Products, and New Grace, comprised of petroleum and chemical processing-driven Catalysts and Materials Technologies.
Grace officials expect New GCP, with approximately $1.5 billion in sales, to continue to be a leader in cement and concrete chemicals and specialty building materials, while maintaining a strong position in packaging through the Darex can sealant and coating business. The entity will aim to leverage its independent platform, financial flexibility and strong free cash flow, they add, to accelerate growth organically and through acquisitions—especially on the construction side. Darex provides New GCP significant value, management contends, including higher and more stable cash flows and margins than the cyclical construction business underpinning cement, concrete and building materials. The latter businesses and Darex also share integrated manufacturing sites around the world. W.R. Grace President and COO Greg Poling will lead New GCP as president and CEO.
The separation transaction for New GCP and New Grace is intended to be a tax-free spin-off to shareholders for U.S. federal income tax purposes, and scheduled to be consummated by early 2016. “Grace has created significant shareholder value by focusing on our customers, driving innovation and growth, and executing a disciplined capital allocation strategy,” says Chairman and CEO Fred Festa who, along with Senior Vice President and CFO Hudson La Force, will maintain his titles with New Grace.
“Our Board and management team continuously evaluate strategic options to create value and, after a comprehensive review, determined that this separation is in the best interest of the Company and shareholders. The time is right to create two strong, independent companies that will benefit from improved strategic focus, simplified operating structures, and more efficient capital allocation,” Festa adds. “We have a world class team of talented people who have worked hard to transform Grace into a high performing company. Those efforts allow us to take this next important step in our evolution. We’re confident that both teams will maintain the customer focus and commitment to growth and value creation that have been keys to our success.”
Management envisions New Grace, positioned for $1.8 billion in annual sales, to continue to be a global leader in process catalysts and specialty silicas—a high margin, technologically advanced business focused on growth and strong cash flow. With its materials science expertise and complex manufacturing capabilities, officials note, “New Grace will continue to deliver high-value, differentiated technologies to maintain its global leadership positions and drive additional growth and margin expansion. The business will remain differentiated by best in class manufacturing, technical sales and service and R&D.”