Rockwood Holdings, Inc. (ROC): This Move Could Enrich Private Equity and Long-Term Shareholders

What It Means for Rockwood

Although Rockwood appears to be losing a valuable property that is expected to generate as much as $425 million in annual revenue, its management team and shareholders may have the last laugh. Rockwood has made no secret of its intention to shore up its balance sheet and initiate a long-awaited capital-return program. While no announcements have yet been made about the timing or structure of such a program, it could involve share buybacks, dividend increases and other moves.

Meanwhile, Rockwood has announced its intention to find buyers for its titanium dioxide and performance additive divisions. If these moves actually happen, they will further streamline Rockwood Holdings, Inc. (NYSE:ROC)’s operations and could produce substantial cost savings in the years to come.

Long-Term Outlook and Possible Plays

Going forward, Rockwood will be a more focused and potentially more profitable company. Although CeramTech is a high-quality asset, the company clearly sees more value and profit potential in its core areas of operation. In addition, cash infusions from the CeramTech, titanium dioxide and performance additives sales should create much-needed liquidity and confer exciting benefits on the firm’s shareholders. Those who wish to take advantage of this deal may wish to do so on temporary weakness in Rockwood Holdings, Inc. (NYSE:ROC)’s stock. Given the amount by which the stock has declined over the past month, this should be easy to achieve. Of course, investors should conduct additional research before committing funds to this situation.

The article This Move Could Enrich Private Equity and Long-Term Shareholders originally appeared on Fool.com and is written by Mike Thiessen.

Mike Thiessen has no position in any stocks mentioned. The Motley Fool owns shares of Rockwood Holdings. Mike is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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