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Air Products' (APD) Separation of Versum Approved by Board

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Air Products and Chemicals Inc.’s (APD - Free Report) board of directors has approved the separation of the company’s Electronic Materials Division business to form Versum Materials Inc.

Air Products’ shareholders will receive one common share of Versum for every two common shares of Air Products held by them as of Sep 21. However, the company will not issue fractional shares of Versum’s stock. These shares will instead be sold in the open market. The net proceeds from the sale will be distributed to the shareholders of Air Products on a pro rata basis who would otherwise have received the fractional shares.

Air Products’ board also declared a dividend on all outstanding shares of Versum, to be paid on a pro rata basis. The dividend is payable on Oct 1, to shareholders on record as of the close of business on Sep 21. However, the board may cancel the dividend any time prior to payout if it believes the dividend payment to be inadvisable.

The shareholders of Air Products do not have to take any steps to receive the common shares of Versum or the cash in lieu of the fractional shares. The registered shareholders as on the record date will be provided a book-entry account statement by mail, a few days after the distribution, reflecting ownership of Versum. Those holding shares of Air Products via brokers will receive the shares of Versum via the Depository Trust Corporation (DTC) post the settlement of "when issued" trading on Oct 6. The separation is expected to be tax-free for the shareholders of Air Products, except for the cash received for the fractional shares.

Earlier this month, the proposed members of the board of directors for Versum were also announced. The board will comprise a number of highly qualified professionals from other companies in the industry, with the Chairman of Air Products, Seifi Ghasemi, acting as the non-executive Chairman of Versum. The name of Guillermo Novo, who has worked for over 30 years within the specialty chemicals and materials industry with Rohm & Haas Company and The Dow Chemical Company, has been proposed for the role of Chairman and President of Versum.

Shares of Air Products fell roughly 2.8% to close at $151.53 on Sep 9.

Air Products saw higher profits in the third quarter of fiscal 2016 (ended Jun 30, 2016), backed by restructuring and operational improvements. Adjusted earnings of $1.92 per share for the quarter beat the Zacks Consensus Estimate, while revenues of $2,434.4 million missed the same. The company reported double-digit EPS growth for the eighth consecutive quarter. 

Revenues from the Materials Technologies business fell 4% year over year to $520 million, hurt by 2% lower pricing, 1% lower volumes and currency headwinds. Sales of Electronics Materials declined 8% due to lower volumes and unfavorable currency movement. Performance Materials’ sales were relatively flat year over year as higher volumes were offset by lower pricing resulting from lower raw material costs.

Air Products currently has a Zacks Rank #3 (Hold). 

Some better-ranked stocks in the chemical space include Mitsubishi Chemical Holdings Corporation (MTLHY - Free Report) , Shin-Etsu Chemical Co., Ltd. (SHECY - Free Report) and Innospec Inc. , all sporting a Zacks Rank #1 (Strong Buy).You can see the complete list of today’s Zacks #1 Rank stocks here.

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