Masco is spinning off its installation division
Masco Corporation announced some cost-cutting measures on Tuesday, not the least of which included the spinoff of its installation unit.
"Today's transformative actions reflect our continued commitment to enhance shareholder value through the active management of our portfolio, effective capital allocation, cost control, and organizational focus," said president and CEO Keith Allman. "As separate companies, both Masco and the Services Business will have greater flexibility to focus on and pursue their respective growth strategies. In addition, the actions we are taking at the corporate office are intended to improve our cost position and drive value across our enterprise. Masco remains committed to creating shareholder value by profitably growing in branded building products."
The strategic initiatives, which were devised with the intent to drive shareholder value, entail spinning off 100% of the company's Installation and Other Services businesses into an independent, publicly traded company through a tax-free stock distribution to Masco shareholders.
Additionally, the company is seeking to implement a share repurchase program for 50 million shares of common stock.
Other measures will be aimed at reducing corporate expense and streamling company operations. Masco expects these initiatives to cost the company $30 million over the next several quarters, with annual savings of $35 to $40 million hereafter.
"Over the past several years, Masco has strengthened the Services Business by reducing fixed costs and implementing lean processes to achieve supply chain savings," said Allman. "As such, we believe the Services Business is now properly positioned to operate as a separate company. The Services Business will focus on growth by capitalizing on North American new home construction as well as further expanding into commercial and retrofit categories. Masco shareholders stand to benefit from the additional value created by the spin-off."
Taking the reigns at the new Service Business company will be Jerry Volas as CEO (currently Masco group president), Robert Buck as president and COO (currently president of Masco Contractor Services), and John Peterson as CFO (currently CFO for Masco Contractor Services).
The spinoff is still subject to customary conditions and regulatory approval. The separation is expected to be completed by mid-2015.