UPDATE 3-Chemical maker FMC splits farm business and mineral unit

Mon Mar 10, 2014 2:31pm EDT

* CEO Pierre Brondeau to lead agricultural solutions and health and nutrition business

* Company to name new CEO for FMC Minerals in coming months

* Each company to be listed on the New York Stock Exchange

* Shares rise as much as 8 pct to life-high

By Swetha Gopinath

March 10 (Reuters) - Chemical maker FMC Corp said it would split into two companies as it looks to separate its stable and steadily growing agriculture, health and nutrition businesses, from its cyclical minerals division.

FMC's shares rose as much as 8 percent to a life-high of $83.94 on Monday on the New York Stock Exchange.

Chemical companies, including Dow Chemical Co and DuPont, are shifting their focus to agriculture and other specialty businesses to lower their reliance on businesses exposed to volatile swings in commodity prices.

Dow is facing pressure from activist shareholder Daniel Loeb to spin off its slow-growing petrochemical businesses. DuPont said in July that it would sell its once-lucrative paints business, a few days after it was reported that investor Nelson Peltz had taken a stake.

FMC's Chief Financial Officer Paul Graves told Reuters that the company's decision to split its businesses was taken by the board and "not forced by anybody."

"The minerals business is a more cyclical business, so we started to face the situation that we were trading more as a growth company but had on the side a cyclical business which was starting to require more investment and more attention to growth than in the past," FMC Chief Executive Pierre Brondeau said on a conference call with analysts on Monday.

FMC had "under-managed" the minerals business over the past year, and it had been able to deploy less capital, management time and attention to it, Graves said.

Earnings at FMC Minerals, which will hold the company's soda ash and lithium businesses, are expected to rise 19 percent to $153 million, based on the midpoint of FMC's 2014 outlook. Revenue is expected to grow 7 percent to $1.0 billion.

Demand for soda ash, which FMC makes for a number of industrial customers, has been cyclical due to an uneven global economic recovery.

But FMC is upbeat about its lithium business, which makes chemicals used in electric car batteries.

"The largest upside to our growth expectation would come from the greater penetration and mix of electric vehicles," Brondeau said.

FMC, which has a market capitalization of $10.35 billion, said the split would be through a tax-free distribution of shares in the new companies to its shareholders.

Brondeau will lead the company holding FMC's agricultural solutions and health and nutrition businesses. A CEO for FMC Minerals will be named in the coming months, FMC said.

Eric Linser, a wealth manager at Avant-Garde Advisors said the split made sense and should ultimately unlock more value for shareholders. Avant-Garde owns shares of DuPont.

GROWTH STORY

FMC's agricultural solutions business provides crop-protection products such as herbicides, fungicides and insecticides. The health and nutrition business makes natural colors for food, binders and coatings, among other products.

Graves told Reuters that FMC will look to expand its nutrition and health business through deals worth $200 million to $400 million in about a year.

Earnings at this business are expected to rise 15 percent to $815 million, based on the midpoint of FMC Corp's 2014 outlook. Revenue is expected to increase 16 percent to $3.35 billion.

Brondeau characterized the company's agriculture business, its largest unit by revenue, as "self-funding".

FMC said it expects to complete the separation in early 2015 and list the two companies on the New York Stock Exchange.

The company completed the sale of its peroxygens unit to investment firm One Equity Partners earlier this month.

FMC is being advised by Bank of America Merrill Lynch and Goldman Sachs. Wachtell, Lipton, Rosen & Katz is serving as its legal adviser.

FMC shares were up 5 percent at $81.74 on Monday afternoon. The stock has risen 27 percent in the past year.

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