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Air Products and Chemicals Says Yes to Versum Spin-off

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Sep. 12 2016, Published 2:17 p.m. ET

Air Products and Chemicals approves Versum spin-off

On September 9, the board of directors of Air Products and Chemicals (APD) approved the spin-off of its electronic materials division from the remaining business of APD to form Versum Materials. APD shareholders will receive one share of Versum common stock for every two shares of APD’s common stock. However, the fractional shares of Versum arriving from the spin-off will be exchanged for cash through open market operations. APD has set the record date for the spin-off as September 21 and the effective date as October 3, 2016. Thus, according to APD, Versum will trade under the symbol “VSM.”

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Impact of spin-off on APD share prices

Typically in spin-offs, the stock price of the parent company will fall to the extent of the distribution ratio once the new company begins to trade on the effective date. To illustrate this, assume that APD stock is trading at $150 per share. Once the Versum shares are distributed as per the agreed ratio (in this case, it is one share of Versum for every two shares of APD) on the trading day, theoretically the APD stock price should trade at $100 per share, and the new Versum stock should trade at $50 per share. The market prices change very fast, but the trading prices should be close to the prices we have mentioned.

APD stock price

On September 9, 2016, APD closed at $151.53, down 3.5% for the week. APD’s stock price closed 3.0% higher than the 100-day moving average price of $147.10, indicating an upward trend in the stock. On a year-to-date basis, APD has moved up by 16.5%. The Materials Select Sector SPDR ETF (XLB), which holds 4.4% in APD as of September 9, dropped 3.7% for the week and closed at $47.44. The top holdings of the XLB are Dow Chemical (DOW), DuPont (DD), and Monsanto (MON), which have weights of 10.8%, 10.8%, and 8.4%, respectively, as of September 9, 2016.

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