Shares of chemical company
) shot up to reach a new 52-week high after it announced its
plans to split itself into two independent public
The move will allow the Pennsylvania-based company to separate
its growth businesses - Agricultural Solutions and Health and
Nutrition - from the Minerals division, which is a more cyclical
business. The Minerals unit remains challenged with continued
double-digit decline in profits. A somewhat weak soda ash export
pricing environment and higher costs are hurting the segment's
The breakup will result in the creation of two distinct
companies - "New FMC", which will consist of the company's
Agricultural Solutions and Health and Nutrition segments, and
"FMC Minerals", which will comprise its Minerals division that
includes alkali chemicals - the largest global producer of
natural soda ash - and the lithium business that makes products
used in electric car batteries and pharmaceuticals.
The separation, which is subject to final Board clearance and
other customary conditions, will be carried out in the form of a
tax-free distribution of shares to the company's existing
shareholders. FMC Corp. expects to close the separation in early
2015, following which, each company is expected to be listed on
FMC Corp.'s shares rose as much as around 8% to clock a new
52-week high of $83.94 yesterday. The stock pulled back to close
the day at $83.10, gaining around 6.7%. The company's shares are
up roughly 38% over a year.
New FMC will be a technology-based and customer-driven
company. Combined revenues and earnings for the Agricultural
Solutions and Health and Nutrition units are expected to be
roughly $3.35 billion, up 16% year over year, and $815 million,
up 15% year over year, respectively, based on the midpoint of the
company's guidance released in Feb 2014. New FMC is expected to
maintain a strong balance sheet and financial policies consistent
with FMC Corp.'s current credit rating.
For FMC Minerals, revenues and earnings (based on the midpoint
of company's guidance) are expected to be around $1 billion and
$153 million, respectively, reflecting a 7% and 19% year over
year rise, respectively. The entity is expected to generate
strong cash flow and have the financial flexibility to execute
select investment opportunities.
FMC Corp.'s incumbent President, CEO and Chairman Pierre
Brondeau will lead New FMC. A new CEO will be appointed for FMC
Minerals in the coming months.
Bank of America Merrill Lynch, a division of
Bank of America
) are acting as financial advisors to FMC Corp. on the
transaction while Wachtell, Lipton, Rosen & Katz is serving
as legal advisor.
The separation represents a part of FMC Corp.'s "Vision 2015"
strategy, a road map for future. The company feels that creation
of two publicly-listed entities will allow their respective
management to effectively execute their own strategy and enable
the adoption of appropriate capital structure.
As part of Vision 2015, FMC Corp. simplified its operational
structure in April 2013 by restructuring its reporting segments
to four units - Agricultural Solutions, Health and Nutrition,
Minerals and Peroxygens. The company recently completed the sale
of its Peroxygens business to affiliates of
) private investment arm - One Equity Partners - for $200
FMC Corp., a Zacks Rank #3 (Hold) stock, expects above-market
rate growth to continue for its agricultural business in 2014,
driven by favorable market conditions, continued market share
gains and new product introductions.
Moreover, the Omega-3 product line is expected to drive
results in the nutrition and health business. FMC
Corp. is also optimistic about its lithium business as
demand is expected to remain strong on the back of greater
adoption in electric vehicles and other applications.
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