MOSCOW (MRC) -- WR Grace has rejected a USD4-billion takeover bid from private investment fund 40 North Management (New York), its largest shareholder. 40 North made a USD60/share cash offer on 9 November, a 35% premium to Grace’s closing share price on 6 November, said Chemweek.
Grace shares jumped 27% on the news, closing at USD55.99/share on 9 November. 40 North owns a 14.9% stake in Grace and has two seats on the board following an agreement reached last year.
Grace said its board "believes that 40 North’s $60/share proposal significantly undervalues the company and is not a basis for further discussion." The company said it is "carefully evaluating and thoroughly discussing its value creation 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."
40 North said that a decline in margins in key businesses and failure to communicate effectively regarding environmental liabilities has created a drag on stock performance since the spinoff of its construction materials business GCP Applied Technologies in 2016. "Grace has underperformed the S&P 500 by 138% since the spin-off of GCP and is currently trading at 8.1x EV/EBITDA, which is about 2.5 times below its historical multiple and 3.0 times below its proxy peers,” 40 North said. 40 North said the offer "is well in excess of what the company will be able to achieve on its current course" and that it would allow Grace to solicit competing proposals for a period following any agreement. The proposal "guarantees that the company can secure a healthy premium for its stockholders while holding open the opportunity to obtain an even higher valuation."
In rejecting the bid, Grace said it has "a portfolio of high-value, specialty businesses and while end markets have been significantly impacted by the pandemic, the fundamentals of its businesses remain strong and demand trends continue to improve. As the company has communicated, most recently on its third quarter 2020 earnings call, Grace has often pursued opportunities to maximize shareholder value." Grace said its board "remains open to all opportunities to maximize value for shareholders."
Goldman Sachs and Moelis & Company are serving as financial advisors and Wachtell, Lipton, Rosen & Katz is serving as legal counsel to Grace. 40 North has retained Citi as financial adviser.
As MRC informed earlier, W. R. Grace & Co. licenses UNIPOL PP process technology to Dongguan Grand Resource for two additional lines. This is part of the continued investment in UNIPOL PP Process Technology lines by DGR. The first license was signed in 2016. Building additional capacity at the same site will help DGR further optimize costs, shorten construction time, and broaden their product portfolio.
According to MRC's ScanPlast report, PP shipments to the Russian market reached 767,2900 tonnes in the eight months of 2020 (calculated using the formula - production minus exports plus imports - and not counting producers' inventories as of 1 January, 2020). Supply increased exclusively of PP random copolymer.
A leader in polyolefin catalysts and licensing, Grace has the world’s broadest portfolio of polypropylene and polyethylene catalyst technologies used to produce thermoplastic resins for a variety of applications. A leading innovator and strategic partner to its customers, Grace supplies catalyst solutions for all polyolefin processes, as well as polypropylene process technology and process controls. Grace employs approximately 3,700 people in over 30 countries.