W.R. Grace & Co. has agreed to be acquired for $4.6 billion by a New York building materials company in an all-cash deal that also would fold in a North Carolina-based chemical manufacturer that Grace planned to acquire.
The Columbia-based specialty chemical giant said Monday that Standard Industries Holdings Inc., the parent of Standard Industries, will acquire all outstanding shares of Grace common stock for $70 per share through its investment arm, 40 North Management LLC.
Grace’s headquarters will remain in Columbia, where it employs about 600 people, becoming a privately held standalone company within the portfolio of Standard Industries, which includes businesses GAF, BMI Group, Schiedel, Siplast, SGI and GAF Energy. Grace also employs about 550 more workers at a plant in Curtis Bay, which makes catalysts and silicas used to produce fuel, plastics, food, beverages, coatings and pharmaceuticals.
Howard County Executive Calvin Ball welcomed Standard Industries and said he believed the company would thrive in Columbia and the county.
“W.R. Grace provides hundreds of jobs in Howard County, which is a testament to our desirable geographic location and our broad talent base,” Ball said in an email. “I am certain that [Standard] too will benefit from Howard County’s strong commitment to fostering innovation.”
The price represents a 59% premium over Grace’s closing price of $44.05 on Nov. 6, the last trading day before 40 North proposed acquiring Grace.
40 North is Columbia-based Grace’s largest shareholder with 14.9% of its outstanding shares. Grace’s board of directors has approved the acquisition, which is subject to a shareholder vote and regulatory approvals.
Grace rejected an initial unsolicited bid of $60 per share from 40 North in November. The investment firm increased its offer in January to $65 per share, or $4.3 billion, and Grace agreed to talks. Earlier this month, the investment firm raised its offer again to $4.6 billion, or $70 per share.
The agreement announced Monday also would include a division of a Charlotte, North Carolina-based chemical manufacturer, Grace said. Grace had said in February that it planned to expand its pharmaceutical manufacturing with a $570 million acquisition of Fine Chemistry Services, a division of Albemarle Corp.
40 North also will assume W.R. Grace’s debt, bringing the deal’s total value to $7 billion.
“We are thrilled to welcome Grace to the Standard Industries family and look forward to working with its exceptional team to usher in a new era of innovation and growth for Grace, its employees, customers and the communities in which it operates,” said David Millstone and David Winter, co-CEOs of Standard Industries Holdings, in a joint statement Monday.
Hudson La Force, Grace’s president and CEO, said the deal with Standard is the “best path forward” for the company and its shareholders.
“Standard’s $7 billion investment in Grace reflects their confidence in the significant growth opportunities we have and enables our shareholders to realize immediate value at a significant cash premium,” La Force said in an announcement.
Standard’s deal to acquire Grace is expected to close in the fourth quarter.
John P. McNulty, a U.S. chemicals analyst with BMO Capital Markets, called the transaction price fair and reasonable in a report Monday. A bidding war seems unlikely because no other offers emerged in the past six months, McNulty said.
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But “it is difficult to rule anything out entirely given the quality of the business and reasonable valuation,” McNulty said. “We commend the [Grace] management team/Board for ‘sticking it out’ for a fair valuation as well as simultaneously working to change the narrative away from refining toward end-markets with loftier growth — both of which drove additional value for... shareholders.”
The transaction is not contingent upon financing, with commitments already made by J.P. Morgan Chase, BNP Paribas, CitiBank and Deutsche Bank and investment funds affiliated with Apollo Global Management as capital partner.
40 North has entered into a voting agreement with Grace in which it has agreed to vote its shares of Grace common stock in favor of the deal.
Grace said it will suspend payment of a dividend going forward. It will release first-quarter earnings May 6 but will not host an earnings call.
Grace’s shares closed Monday at $68.38 each, up $4.14 for the day.
After the deal was announced, stockholder rights firm Bragar Eagel & Squire said it is investigating whether Grace board members breached their fiduciary duties or violated the federal securities laws in connection with the acquisition agreement.
The firm “is concerned that Grace’s board of directors oversaw an unfair process and ultimately agreed to an inadequate merger agreement,” the firm said in an announcement.