Exploring Asset Separation After Activist Pressure, LSB Industries Deserves A Spot On Your Watch List
- The management of LSB Industries is exploring a separation of the company's Chemicals and Climate Control divisions.
- If separated, the "conglomerate discount" will be gradually resolved by market forces as the market is able to independently value the business units on a separate basis.
- The company's Chemicals division is subject to commodity price fluctuations, and requires substantial capital expenditure, potentially stifling the true value of the Climate Control unit.
- Due to the phenomenon of forced selling in the aftermath of a spin-off, investors will also likely have the opportunity to make bargain purchases on near-term volatility.
- Management is exploring placing Chemical assets into an MLP structure, promising investors significant income potential, should a spin-off occur.