Parent company maps Grace Construction Products’ independent future

Directors have approved a plan to separate Columbia, Md.-based W.R. Grace & Co. 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 and Cambridge, Mass., headquarters, 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 consummate 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.”

SCC, HPC demand help construction chemicals’ five-year outlook

U.S. demand for construction chemicals used in on-site applications is projected to grow 8.2 percent per year through 2018 to $12.1 billion. Gains will be primarily driven by double-digit increases in building construction expenditures, owing to healthy economic growth and an improved consumer financial outlook. Increased economic activity and greater government investment in the aging infrastructure will also support construction chemical use in nonbuilding applications.

While overall growth will be underpinned by the strong increases in construction spending, the product mix will also continue to shift toward new, higher value formulations and technologies as the market adapts to environmental regulations and more stringent building codes. These and other trends are presented in Construction Chemicals, a new study from Cleveland market researcher Freedonia Group.

“Following several years of recovery, a fully healed U.S. housing market will lead to a jump in new residential construction activity,” notes analyst Nick Cunningham. Nonresidential building construction activity is also expected to increase rapidly through 2018, he adds, as economic growth will support a rebound in industrial, office and commercial sectors.

Greater economic activity will also require increased investment in infrastructure, both public and private, particularly for the aging transportation network; this will especially spur demand in two of seven categories detailed in Construction Chemicals: Cement & Asphalt Additives and Coatings. Growing demand for chemical additives and coatings will also result from the increasing use concrete technologies that offer superior engineering properties and ease of placement, such as high performance concrete and self-consolidating mixes.

Construction Chemicals finds 2013-2018 growth rates for Cement & Asphalt Additives of 11.2 percent, or $1.7 billion to $2.8 billion, and Grouts & Mortars of 11 percent, from $475 million to $800 million. Over the six-year forecast horizon, those categories lag only Sprayed Urethane Foam, which Freedonia analysts see a 12.2 percent annual growth rate.

Across the construction chemicals spectrum, higher value formulations will continue to gain share in many product segments in response to both environmental and performance concerns. Regulations addressing products’ volatile organic compound content have been enacted at federal and state levels. This trend will be further intensified by consumer preferences for low odor and easy cleanup water-based products. The transition toward better performing, longer lasting products will boost the value of the construction chemicals market going forward, though the decreased replacement frequency and volume of chemicals required will serve as a check on further growth. Orders for Construction Chemicals can be placed and additional information or industry research obtained through