Courage under pressure at Grace Norris, new CEO, could be the man who restarts growth

Stock rises amid optimism

Specialty chemicals

November 16, 1998|By BLOOMBERG NEWS

BOCA RATON, Fla. -- W. R. Grace & Co.'s recent appointment of AlliedSignal Inc.'s Paul Norris as president and chief executive could signal a strategic shift toward building the specialty chemicals business after years of selling off assets, analysts say.

W. R. Grace, a specialty chemicals producer with annual sales of about $1.5 billion, last month named Norris to replace 63-year-old Albert Costello, who announced in May that he planned to retire. Norris, 51, assumed his new post this month.

The company has a plant in South Baltimore that employs approximately 700 workers. It also operates a research center in Columbia.

Boca Raton-based Grace has sold or spun off more than 30 businesses in the past several years, including the spinoff of its packaging business to Sealed Air Corp. in a transaction valued at $6.2 billion in March.

Analysts said Norris' relative youth and his reputation as a business builder suggest that Grace is ready to grow internally and through acquisitions.

"Grace will now probably go from contracting its businesses to expanding," said Chris Bodnar, an analyst at Bear Sterns Inc. who rates the stock "neutral."

Some analysts who had expected the company to sell more assets or be bought by another chemical company said that's much less likely now.

Norris formerly was senior vice president of AlliedSignal's $1.6 billion specialty chemicals business, where revenue increased by 50 percent the past two years.

Before that, he "significantly" expanded AlliedSignal's industrial polymer business as president of the polymers business, Grace said.

Norris began his career in 1971 at Grace Davison and was general manager of Engelhard Corp.'s catalyst business before joining AlliedSignal in 1989. Norris said in a statement that he was "looking forward to working with a strong operating team to drive growth" at W. R. Grace.

That won't be easy given the outlook for stagnant demand in specialty chemicals and the premiums being paid in specialty chemical acquisitions, analysts said.

Still, Norris' track record indicates that he'll find suitable acquisition targets quickly, said Mark Gulley, an analyst at Morgan Stanley Dean Witter.

"With this move, Grace has gone from a seller in a seller's market to a buyer in a seller's market," said Gulley, who has an "outperform" rating on the stock. "But if there are good opportunities out there, he'll know about them."

Last month, Grace scrapped a tentative $455 million deal to purchase Imperial Chemicals Industries PLC's Crosfield Group.

Grace has said it intends to sell its Darex Container Products business, which makes container sealants, and the company is still expected to go ahead with that sale. Analysts valued the unit at about $300 million.

After that, Grace is expected to focus on building its main specialty chemicals businesses, such as catalysts used to accelerate chemical reactions in oil refining.

"Norris has to come in and lay out his plan, but at the end of the day it appears that plan will be weighted toward building the business," said Bear Sterns' Bodnar.

Grace stock closed at $17.625 Friday, 76 percent above its 52-week low of $10 set Oct. 12.

Pub Date: 11/16/98

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