Chemtura Corp. (0.1%) (CHMT)(CHMT - $25.29 - NYSE) is a global developer, manufacturer, and marketer of engineered specialty chemicals. Its products are used as additives, ingredients, or intermediates, serving major industries such as agriculture, building & construction, energy, electrical & electronics, transportation, and general industrial. Since its emergence from Chapter 11 in November 2010, under the leadership of Craig Rogerson, the management team has focused on actively managing its portfolio via investments in three vertical markets (transportation, electronics & energy, and agriculture), while monetizing businesses with below target long term potential. The recent sale of Consumer Products generated $250M of net proceeds; the potential sale of AgroSolution (presently undervalued) should generate another $900M of net proceeds. We expect this cash to be used for debt reduction, share repurchases, investments in the remaining operations, and potential bolt-on acquisitions. As management aims to build a more focused business portfolio, the remaining operations, Industrial Performance Products (petroleum additives and urethanes) and Industrial Engineered Products (bromine & flame retardants and organometallics), are expected to grow revenues via innovations, share gain, and geographic expansion, while bottom line will benefit from internal actions. In addition, market demand for flame retardants used in electronics and insulation foam applications should improve. We estimate that the "New Chemtura" (exclusive of Consumer and Ag) will generate EPS of $1.50 and $1.80 in 2015 and 2016, respectively. The EPS calculation is based on a declining number of shares: it assumes that proceeds from the sale of Consumer Products and estimated proceeds from the potential sale of AgroSolution will be mostly used for share repurchases. Management should announce its decision regarding whether it will sell or keep AgroSolution by the end of the second quarter; the decision will depend on the valuation given to the operations by the interested party/ies.
From Mario Gabelli (Trades, Portfolio)'s Gabelli Asset Fund's first quarter 2014 shareholder commentary.
