MeadWestvaco to spin off chemical unit

This lab at MWV Specialty Chemicals research and development center in North Charleston focuses on asphalt additives.

Packaging giant MeadWestvaco Corp. is preparing to spin off its fast-growing North Charleston division.

The company said Thursday that MWV Specialty Chemicals will become a separate, publicly traded business by the end of the year.

MeadWestvaco's board already has approved the deal, which followed a "strategic review process" and will be structured as a tax-free transaction for shareholders, CEO John Luke said in a statement.

"The separation of specialty chemicals will establish two strong companies that are better positioned to compete and profitably grow in their targeted markets," Luke said.

The Richmond, Va.-based company said it expects to use cash proceeds from the spinoff to repay debt to maintain its investment-grade credit rating.

"We are in a strong position to take this next step to maximize value for our shareholders," Luke said.

Though best known for its paper and packaging businesses, MeadWestvaco has been developing wood-based chemicals for more than a century. It said it will be open to other options for the North Charleston subsidiary during the separation process.

The chemicals division employs around 450 workers in the region and more than 1,200 worldwide. It is headquartered on Virginia Avenue, across from the Cooper River paper mill that its parent company shed in 2008.

The unit makes compounds that are used in printing inks, asphalt paving and adhesives. Other customers include the agricultural, paper and petroleum industries. The business also makes "activated carbon" products that go into automotive emission-control systems and have applications for air, water and food purification.

It is now MeadWestvaco's second-largest subsidiary based on revenue. Through the third quarter last year, its sales totaled $800 million, up 7 percent from the same period of 2013.

The New York investment fund Starboard Value called for a sale of the chemical business last spring, saying the business was undervalued. Shares of MeadWestvaco rose nearly 6 percent Thursday, or $2.50, to close at $45.59.

The chemical division is expanding in North Charleston. It announced in 2013 that it would invest more than $9 million to build an innovation center that will create about 25 high-skilled jobs. The goal was to focus on refining and improving products .

The 27,000-square-foot expansion is expected to begin operations this year and is to be staffed mostly by engineers and scientists, the company has said.

The Associated Press contributed to this report.