COLUMBIA, Md.--(BUSINESS WIRE)--W. R. Grace & Co. (NYSE: GRA) (“Grace” or the “Company”) today announced
that its Board of Directors has approved a plan to separate into two
independent, publicly traded companies. The two companies, to be named
prior to closing, will be “New Grace,” comprised of Grace’s
Catalysts Technologies and Materials Technologies business segments
(excluding the Darex packaging business), and “New GCP,”
comprised of Grace’s Construction Products business segment and the
Darex packaging business. The separation transaction is intended to be a
tax-free spin-off to Grace shareholders for U.S. federal income tax
purposes, and is expected to be completed in approximately 12 months.
“Grace has created significant shareholder value by focusing on our
customers, driving innovation and growth, and executing a disciplined
capital allocation strategy,” said Fred Festa, Grace Chairman and Chief
Executive Officer. “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 our 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.”
"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," continued Festa.
"We’re confident that both teams will maintain the customer focus and
commitment to growth and value creation that have been keys to our
The Company believes that the planned separation will:
Enhance Strategic Focus: Two strong, focused operating
companies with industry-leading market and technology positions,
strong free cash flow and high returns on invested capital will be
created through this transaction. Each company will be positioned to
capture its distinct growth opportunities, focused on its unique
customers, with more efficient capital allocation and the scale and
cash flow needed for growth and value creation.
Simplify Operating Structures; Create Strong Financial Profiles:
Each company presents compelling growth and margin profiles.
Simplified operating structures will improve management focus and
allow improved cost productivity and optimized functional support.
Optimized capital structures will provide financial flexibility to
pursue organic growth and M&A opportunities.
Create Distinct Investment Identities: New Grace and New GCP
will provide unique and compelling investment opportunities with
different growth drivers and simpler investor theses. Investors will
have the opportunity to evaluate and invest in each business based on
its respective financial profile, performance and prospects.
Two Focused Businesses
After the separation, New Grace will consist of
the Company’s existing Catalysts Technologies business and its Materials
Technologies business (excluding the Darex packaging business). The
Company expects New Grace to continue to be a global leader in process
catalysts and specialty silicas. New Grace will be a high margin,
technologically advanced business focused on growth, margin expansion
and strong cash flow. With its materials science expertise and complex
manufacturing capabilities, 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.
Post separation, the Company expects New Grace to have sales of
approximately $1.8 billion (approximately $2.2 billion including sales
from our unconsolidated ART JV)(1). The Company believes that
New Grace will seek to make strategic bolt-on acquisitions in its core
segments as well as acquisitions to expand its high margin,
high-performance specialty chemicals and performance materials
portfolio. The Company expects New Grace’s net leverage at the time of
the spin-off to be between 2.0x and 2.5x Adjusted EBITDA.
The Company expects New GCP to continue to be a
leader in cement and concrete chemicals, specialty building materials
and can sealants and coatings with strong brands and positions. New GCP
will aim to leverage its independent company platform and strong free
cash flow to accelerate growth in its global construction products
segments and to maintain its segment leadership positions in can
sealants and coatings. New GCP will have the financial flexibility to
grow both organically and through acquisitions in its construction
Including Darex in the new company provides significant value to New
GCP, including higher and more stable cash flows and margins. The
businesses also share many integrated manufacturing sites around the
world, providing strong operating leverage. With Darex, New GCP can
support higher financial leverage, giving it additional resources to
pursue its growth objectives.
Post separation, the Company expects New GCP to have sales of
approximately $1.5 billion(1). The Company expects New GCP’s
net leverage at the time of the spin-off to be between 3.0x and 3.5x
Experienced and Proven Leadership
Upon completion of the transaction, New Grace will continue to be led by
Fred Festa, Chairman and Chief Executive Officer, and Hudson La Force,
Senior Vice President and Chief Financial Officer.
Greg Poling, currently President and Chief Operating Officer of Grace,
will lead New GCP as President and Chief Executive Officer.
The separation transaction is intended to be a tax-free spin-off to
Grace shareholders for U.S. federal income tax purposes. The separation
is subject to customary closing conditions, including final approval by
Grace’s Board of Directors.
Goldman, Sachs & Co. is serving as financial advisor to Grace, and
Wachtell, Lipton, Rosen & Katz is serving as legal counsel.
Grace will discuss the transaction during an investor conference call
and webcast today starting at 8:30 a.m. ET. To access the call and
webcast, interested participants should go to the Investors – Events &
Presentations portion of the company's web site, www.grace.com,
and click on the webcast link. The investor presentation will be
available at 8:00 a.m., ET.
Those without access to the Internet can listen to the investor call by
dialing +1 877.415.3178 (U.S.) or +1 857.244.7321 (International) and
entering participant passcode 20461224.
An audio replay will be available after 10:00 a.m. ET today. The replay
will be accessible by dialing +1 888.286.8010 (U.S.) or +1 617.801.6888
(International) and entering participant passcode 20291966. The replay
will be available for one week.
Built on talent, technology, and trust, Grace is a leading global
supplier of catalysts; engineered and packaging materials; and specialty
construction chemicals and building materials. The company’s three
industry-leading business segments—Grace Catalysts Technologies, Grace
Materials Technologies, and Grace Construction Products—provide
innovative products, technologies, and services that improve the
products and processes of our customer partners in over 150 countries
around the world. Grace employs approximately 6,500 people in over 40
countries and had 2014 net sales of $3.2 billion. More information is
available at www.grace.com.
This announcement contains forward-looking statements, that is,
information related to future, not past, events. Such statements
generally include the words “believes,” “plans,” “intends,” “targets,”
“will,” “expects,” “suggests,” “anticipates,” “outlook,” “continues” or
similar expressions. Forward-looking statements include, without
limitation, expected financial positions; results of operations; cash
flows; financing plans; business strategy; operating plans; capital and
other expenditures; competitive positions; growth opportunities for
existing products; benefits from new technology and cost reduction
initiatives, plans and objectives; and markets for securities. For these
statements, Grace claims the protection of the safe harbor for
forward-looking statements contained in Section 27A of the Securities
Act and Section 21E of the Exchange Act. Like other businesses, Grace is
subject to risks and uncertainties that could cause its actual results
to differ materially from its projections or that could cause other
forward-looking statements to prove incorrect. Factors that could cause
actual results to materially differ from those contained in the
forward-looking statements include, without limitation: risks related to
foreign operations, especially in emerging regions; the cost and
availability of raw materials and energy; the effectiveness of its
research and development and growth investments; acquisitions and
divestitures of assets and gains and losses from dispositions;
developments affecting Grace’s outstanding indebtedness; developments
affecting Grace's funded and unfunded pension obligations; its legal and
environmental proceedings; uncertainties that may delay or negatively
impact the spin-off or cause the spin-off to not occur at all;
uncertainties related to the company’s ability to realize the
anticipated benefits of the spin-off; the inability to establish or
maintain certain business relationships and relationships with customers
and suppliers or the inability to retain key personnel during the
period leading up to and following the spin-off; costs of compliance
with environmental regulation; and those additional factors set forth in
Grace's most recent Annual Report on Form 10-K, quarterly report on Form
10-Q and current reports on Form 8-K, which have been filed with the
Securities and Exchange Commission and are readily available on the
Internet at www.sec.gov.
Reported results should not be considered as an indication of future
performance. Readers are cautioned not to place undue reliance on
Grace's projections and forward-looking statements, which speak only as
the date thereof. Grace undertakes no obligation to publicly release any
revision to the projections and forward-looking statements contained in
this announcement, or to update them to reflect events or circumstances
occurring after the date of this announcement.
1 Year ended December 31, 2014, reflecting business segment