Air Products & Chemicals will separate its chemical business, which it calls materials technologies, in a tax-free spin-off to shareholders. The plan doesn’t come as a surprise; since coming aboard last year, chief executive officer Seifi Ghasemi has been promising to focus on Air Products’ core business of industrial gases.
The materials business will launch within a year with six divisions, including epoxy curing agents and electronic materials for the semiconductor industry. “It will be one of the premier specialized companies in the world,” Ghasemi said.
The materials business had sales of $2.2 billion in the 12 months leading up to June 30; Air Products’ gas sales were almost $8 billion. For the past year, according to Ghasemi, Executive Vice President Guillermo Novo has operated the materials business as if it were already independent. Novo will be the new company’s CEO.
Ghasemi, who previously led Rockwood Holdings, was hired by the board of Air Products in August 2014 after activist investor William A. Ackman took a 9.8% stake in the company. Activists have been pressuring diversified chemical firms to split up to maximize shareholder value. The biggest example of such a move was DuPont’s spin-off of Chemours, its performance chemicals business, in July.
Compared with industrial gases, Air Products’ materials business requires more spending on innovation but has less need for capital investment. It has been bogged down by the bureaucracy of the larger firm, which absorbed its cash flow and treated it like a “stepchild,” Ghasemi told analysts in a conference call.