Masco To Spin-off Installation And Other Services Business

(RTTNews) - Home improvement and building products company Masco Corp. (MAS) announced Tuesday the board approval for the spin-off of its installation and other services business into an independent, publicly-traded company as part of its strategic initiatives to drive shareholder value.

Following the news, the company's shares are trading higher by more than sic percent in early deals.

The spin-off, which is expected to be completed by mid- 2015, will be implemented through a tax-free stock distribution to Masco's shareholders. It will be subject to final approval by Masco's board of directors.

"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," President and CEO Keith Allman said in a statement.

Allman added that both Masco and the services business will have greater flexibility to focus on and pursue their respective growth strategies as separate companies.

Masco noted that the spun-off 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 named current Masco Group President, Jerry Volas, to take over as the CEO of the services business. Robert Buck, currently Masco Contractor Services' President, is named to be the president and chief operating officer as well as John Peterson, current Masco Contractor Services' CFO, will become the CFO on the services business.

Following the spin-off, Masco will continue to be listed on the NYSE under "MAS," and will remain headquartered in Taylor, Michigan. Meanwhile, the services business will be headquartered in Central Florida.

Taylor, Michigan-based Masco noted that the other strategic initiatives to drive shareholder value over the mid- to long-term are to reduce corporate expense and initiation of a significant share repurchase program.

The Masco board has approved the repurchase of an aggregate of 50 million shares of the company's common stock, which represents about 14 percent of Masco's currently outstanding shares.

The company said the repurchases are expected to be made over a multi-year period beginning in 2014, and will be funded through operating cash flow and cash on hand of $1.4 billion, as of June 30, 2014.

Further, the company is anticipating company-wide annual savings of $35 million to 40 million through the reduction of corporate expense and simplification of Masco's organizational structure. It also estimates incurring a charge of about $30 million over the next several quarters.

"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," Allman added.

Masco added that it has strengthened the services business over the past several years by reducing fixed costs and implementing lean processes to achieve supply chain savings.

MAS closed Monday's regular trading session at $23.32, up $0.23 on a volume of 2.64 million shares.