February 5, 2015 / 1:12 PM / 3 years ago

UPDATE 2-Chemical maker W.R. Grace to split in two, shares jump

(Adds analyst comment, outlook, updates shares)

By Tanvi Mehta

Feb 5 (Reuters) - Specialty chemical manufacturer W.R. Grace & Co said it would split into two companies in a tax-free transaction to shareholders, driving up its shares by as much as 15 percent.

W.R. Grace, which emerged from one of the longest U.S. bankruptcies in 2013, said the split would improve its strategic focus, simplify operations and allow for better use of capital.

"I also believe the split will open up opportunities around the materials space, around the silica space and other inorganic materials," Chairman and Chief Executive Fred Festa said on a conference call on Thursday.

The company reported better-than-expected fourth-quarter adjusted earnings, raised its forecast for 2015 earnings per share, and said it would buy back $500 million of shares.

W.R. Grace said one new company, which would have sales of about $1.8 billion, would consist of its businesses that make products used in the refining, petrochemical, personal care and tire and rubber industries. Festa will lead this business.

The other will comprise Grace's specialty construction chemicals and specialty building materials unit, and have sales of about $1.5 billion.

Tigress Financial Partners analyst Philip Van Deusen said it made sense to isolate the construction business to highlight its strength. Grace's Darex packaging business, which makes products used in sealants and coatings, will be part of this business.

Grace, based in Columbia, Maryland said it expected adjusted earnings of $5.05-$5.45 per share in 2015, exceeding the average analyst estimate of $5.06, according to Thomson Reuters I/B/E/S.

The company filed for Chapter 11 protection in 2001 after a slew of lawsuits related to asbestos used in its products.

Grace's shares were 11.3 percent higher at $101.39 at midday. Up to Wednesday's close, the stock had fallen about 5 percent in the past year. (Reporting By Tanvi Mehta in Bengaluru; Editing by Ted Kerr)

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