Capital Southwest Corp. plans spinoff - Dallas Morning News (blog)

Dallas-based Capital Southwest Corp. plans to spin off some specialty manufacturing operations that it controls into a standalone, publicly traded firm, the company said today before the markets opened.

The transaction is expected to be completed by the end of September 2015.

Joe Armes, chairman and CEO of Capital Southwest, said in a statement that shortly after he joined the company last year he concluded that it operated two different business models “within a corporate and regulatory structure that is ideal for neither.”

The result, Armes said, is that Capital Southwest stock trades at a “significant discount” to net asset value.

One business model is an industrial growth company, Armes said. The other is an equity investment company.

The spin-off will be called Industrial Co. and will include the RectorSeal Corp., the Whitmore Manufacturing Co. and Jet-Lube Inc.

RectorSeal makes specialty chemical products and control devices used for plumbing, heating and air conditioning, electrical and industrial applications. Whitmore and JetLube make specialty lubricants.

The combined operations generated revenue of nearly $220 million in the 12 months ended in March, Capital Southwest said.

“We believe this transaction is the best way to eliminate the market discount to NAV by separating these business models,” Armes said.

In its most recent earnings filing, for the period ended Sept. 30, Capital Southwest reported an NAV per share of $48.79. The company’s stock closed Monday at $36.85.

Prior to joining Capital Southwest, Armes ran a family investment firm and was a key executive with Hicks Holdings and Hicks Sports Group, controlled by Tom Hicks, the former owner of the Texas Rangers.

After the spin-off, Capital Southwest said it will remain a regulated investment company and will invest primarily in debt securities, and may also invest in preferred and common stock.

Armes will remain chairman of Capital Southwest after the spinoff and become chairman and CEO of Industrial Co. Bowen Diehl is expected to become CEO of Capital Southwest. He is currently chief investment officer.

Source: southwest - Google News http://ift.tt/1pMGdnR