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Mergers & Acquisitions

Investor 40 North ups its bid for Grace

The firm says the specialty chemical company would be better off private

by Alexander H. Tullo
January 21, 2021 | A version of this story appeared in Volume 99, Issue 3


W. R. Grace’s board is considering a takeover offer from 40 North now that the investment firm has raised its bid.

On Jan. 11, 40 North increased its takeover offer for Grace to $65 per share from the $60 unsolicited—and rejected—bid it made for the specialty chemical company last November.

Grace at a glance

Headquarters: Columbia, Maryland

Revenues: $1,958 million

Earnings: $126 million

Major businesses: Refining, polyolefin, and chemical catalysts (76% of revenues); silica and specialty chemicals (24% of revenues)

Employees: 4,000

The new offer values Grace’s stock at about $4.3 billion, which represents a premium of 62% over its value before the acquisition overture became public, 40 North notes.

The two companies have a history. 40 North has a nearly 15% stake in Grace, and in 2019 it pressured the company to put two 40 North nominees on its board.

One of those directors resigned in October, citing differences with Grace management over strategic direction. That touched off analyst speculation that Grace could be taken over.

As part of presenting the new bid, 40 North principals David S. Winter and David J. Millstone wrote a letter to Grace’s board. In it, they chide the firm’s management for refusing to negotiate and not presenting shareholders with an alternative to 40 North’s plan to make Grace a private company. “Grace’s shareholders demand, and deserve, far better than this,” they write.

“For the Company’s existing shareholders, a take-private transaction would offer an opportunity to realize immediate liquidity at a value that far exceeds what Grace will be able to achieve on its current course,” the letter reads.

The revised bid prompted Grace executives to bend. In a letter dated Jan. 15, Grace CEO Hudson La Force says the board is “willing to discuss a sale of Grace to 40 North in the context of our ongoing review of strategic alternatives.” La Force does insist on a “full valuation” for Grace, implying he’ll need a higher offer.

Kevin W. McCarthy, a stock analyst with Vertical Research Partners, is also looking for a higher price, telling clients, “We wouldn’t necessarily call $65 per share compelling.” He puts Grace’s fair takeover value at $77 per share. Engaging with 40 North might offer Grace a chance to “move the needle,” he says.


This story was updated on Jan. 21, 2021, with new information about Grace's response to 40 North.



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