W.R. Grace and Company

[Guest JoelS]

W.R. Grace is a speciality materials and chemicals company that went bankrupt, emerged from bankruptcy and has since been turned around. It has an awful reputation for contamination incidents including asbestos related claims. The positives are:

 

- Excellent ROIC, high and growing free cash flow (2015 free cash yield around 6% or $430m on a US $7bn market cap)

- Management has a strong record of value creation.

- Ted Weschler owns 3.74mn shares or a position worth US $360mn at recent prices.

- Company is splitting in two in early 2016. The separation looks rational.

- NOL's of $1.8bn to work their way through. These will stay with 'New Grace'.

- Expect at least $2bn of cash to be returned to shareholders in the next five years (sounds conservative if they grow)

- Share buyback of $500mn authorized, and $500mn just done in 2014.

 

Thoughts?