MWV splits up its packaging and specialty chemicals businesses

The decision follows pressure from activist shareholder Starboard Value, which owns a 6.1% share in the MWV business.

Starboard Value executives had openly criticized MWV in June last year, claiming the business was run to a “conglomerate structure” that resulted in a disconnected businesses with limited synergies.

Tax-free spinoff to be completed by year end​

The move will result in a spinoff that will separate the company’s specialty chemicals operations from its other business operations, which also includes packaging for the health care, food, beverage, home and garden, tobacco and agricultural industries.

The division of the businesses will be carried out as a tax-free spinoff that will result in two independent businesses that will also remain publicly traded.

The move is expected to be completed by the end of 2015, but in the meantime, MWV executives say they will remain open to “value-creating alternatives for the specialty chemicals business throughout the process.”​

Cash from sale will be used to pay off debt ​

“Following a thorough strategic review process, MWV’s board and leadership team determined that a tax-free spinoff of Specialty Chemicals presents the best opportunity to create the greatest value for our shareholders,”​ said John Luke, chairman and chief executive officer, MWV.

“The separation of Specialty Chemicals will establish two strong companies that are better positioned to compete and profitably grow in their targeted markets. This action continues our strong record of returning value to our shareholders, which has exceeded $4 billion over the last 10 years.”​

The company says that cash from the spinoff will be used to pay off debt in an effort to maintain its investment grade credit rating.