Why GCP Applied Stock Soared 16% to a 52-Week High Today

What happened

Shares of GCP Applied Technologies (GCP) soared Monday morning, gaining 16.7% as of 11:55 a.m. ET. With the construction chemicals company agreeing to sell itself for $2.3 billion, the markets wasted no time bidding the stock higher to its proposed buyout price.

So what

This morning, French construction materials company Saint-Gobain (CODY.Y -1.14%) announced it'll acquire all of GCP's outstanding shares at $32 per share, valuing the deal at $2.3 billion, to be paid in cash.

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With GCP shares closing Friday at $27.02 a share, the stock quickly surged today to settle around the buyout price, which represented a premium of around 39% above the volume-weighted average price for the 30 trading days through Nov. 30.

GCP was formed in 2016 when it separated from W.R. Grace. It sells a variety of building products and construction chemicals across North America; the Europe, Middle East and Africa region; the Asia-Pacific, and Latin America. GCP shares have been under considerable pressure in recent months, partly because of the company's muted operational performance. In its third quarter, for example, sales grew only 0.5% year over year to $249.6 million, and its gross margin tumbled to 31% from 40% a year ago as higher raw material and logistics costs ate into revenue.

Now what

Although the deal may not close before the second half of 2022, CEO Simon Bates calls it the start of an "exciting new era" for GCP as it joins Saint-Gobain. The latter, for its part, has already laid out comprehensive plans to integrate GCP and expand its footprint, especially in North America right when federal infrastructure spending is expected to kick off under the Biden administration.

There's little chance, therefore, of a potential higher bid, and going by today's rally in GCP shares, investors are evidently happy with Saint-Gobain's offer.