W. R. Grace & Co. has turned down a $4 billion takeover offer, saying the bid “significantly” undervalues the Columbia-based specialty chemicals giant.
40 North Management LLC, an investment arm of New York-based building materials company Standard Industries, proposed Monday to acquire all of Grace’s outstanding common stock for $60 a share in cash.
Shares of Grace, which had been trading under $45 last week, spiked Monday to close $55.99 each, but were trading down 2.2% Tuesday at $54.75 each.
The unsolicited offer from Grace’s largest shareholder represented a 36% premium over Grace’s closing price Friday and a 42% premium over the stock’s 30-day volume-weighted average price.
In a letter to Grace’s board of directors, Standard co-CEOs David J. Millstone and David S. Winter said their bid offers both value and certainty given significant underperformance since Grace spun off GCP Applied Technologies in February 2016.
At that time, Grace split into two publicly traded companies, GCP, a construction products business, headquartered in Cambridge, Mass., and Grace’s silica and catalyst businesses, which kept the W.R. Grace name and remained based in Columbia. Grace had emerged from a 13-year bankruptcy reorganization caused by its asbestos-related obligations in early 2014.
“We believe shareholders deserve more than the consistent value destruction they have witnessed since 2016 and that a sale of the company would give them a direct path to realizing a compelling premium for their shares and immediate liquidity," the letter said. It would offer “far greater certainty than if Grace were to remain a publicly traded company in this uncertain economic environment.”
The shareholder said it has “patiently supported Grace through many critical junctures since the spin-off of GCP,” but that goals of increasing shareholder value have fallen short, with smaller profit margins in catalysts and materials divisions and underperformance relative to the S&P 500.
The proposal would be well in excess of what the company could achieve on its current course, 40 North said.
Grace’s board said it rejected the bid given the company’s strong prospects and its ongoing review of alternative opportunities.
“40 North’s $60 per share proposal significantly undervalues the Company and is not a basis for further discussion,” the company said in a statement Monday. “The Grace board remains open to all opportunities to maximize value for shareholders.”
While Grace’s customers have been hurt by the pandemic, the company said the fundamentals of its high-value, specialty businesses remain strong and demand is improving.
A spokesman said the company had no additional comment Tuesday.
The company develops and makes catalysts and related products used in energy, refining and chemical manufacturing, and chemicals used in making pharmaceutical, cosmetic and dietary supplement products. It sells to customers in more than 60 countries and employs 4,000 people. It counts a large plant in Curtis Bay among its manufacturing facilities.
40 North, a privately-held investment fund, said it would not have required any corporate or shareholder approvals to finalize a deal with Grace. A purchase agreement would have included a “go shop” provision allowing Grace’s board to review competing proposals.
“Our proposal thus guarantees that the company can secure a healthy premium for its stockholders while holding open the opportunity to obtain an even higher valuation,” the proposal said.
Grace said its board is working with management and financial advisors to evaluate opportunities.
“At the same time, Grace is focused on executing its long-term strategy and advancing its key investments to accelerate profitable growth, improve its competitive advantages and strengthen its portfolio,” the company’s statement said.