W.R. Grace Rejects 40 North $4B Takeover Bid as Undervalued

W.R. Grace rejected 40 North's $4 billon takeover bid, saying that the offer undervalues the chemicals specialist.
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 W.R. Grace  (GRA) - Get Report rejected shareholder 40 North's $4 billion takeover offer. saying it “undervalues the company and is not a basis for further discussion.” 

The chemical manufacturer's board, management and financial advisers were reviewing and discuss ways to maximize value for shareholders, the Columbia, Md., company said.

Goldman Sachs and Moelis are Grace’s financial advisers. Wachtell, Lipton, Rosen & Katz is its legal counsel.

The company also said it was focused on executing its long-term strategy and advancing its key investments to accelerate growth, improve its competitive advantages and strengthen its portfolio. 

“The Grace board remains open to all opportunities to maximize value for shareholders,” the company’s statement said.

W.R. Grace shares on Monday leaped after a media report said the supplier of catalysts and engineered materials received a $60-a-share, or $4 billion, cash takeover offer from 40 North. 

The unsolicited offer represented a 36% premium to the Columbia, Md., company’s Friday close, according to a regulatory filing reported by Bloomberg. 

At last check Grace shares were trading up 0.3% at $56.13. 

40 North, an investment platform tied to Standard Industries of New York, is Grace's biggest shareholder with a stake of around 15%, according to Bloomberg data. 

Closely held Standard has interests in roofing, building materials, solar energy and more. 

“We believe this proposal to take the company private represents the most credible path to unlock value for the company and its shareholders with a high level of certainty,” 40 North principals David Millstone and David Winter had written in a letter to W.R. Grace’s board. 

The firm hired Citigroup as an adviser. It said that it believed it could complete a due-diligence review of Grace within four weeks. And it said it would back a so-called go-shop effort by Grace to solicit higher bids, Bloomberg reported.

Kathleen Reiland, a director of W.R. Grace representing 40 North, resigned her almost a month ago due to disagreements over the company’s strategic direction, Bloomberg reported. 

W.R. Grace is a supplier of catalysts and engineered materials and operates and sells products in over 70 countries. It also makes specialty silica used in covid-19 test kits and treatments.

Two weeks ago Grace reported that third-quarter net income fell to 11 cents a share from 80 cents in the year-earlier quarter. Adjusted earnings were 56 cents versus 98 cents.

The latest per-share figures include 13 cents of costs related to Hurricane Laura’s damage in Lake Charles, La. Grace said its facility there was again fully operational.

And the latest adjusted figure beat the FactSet consensus analyst estimate of 53 cents.

Net sales of $419.4 million were down 11% from a year earlier.

The company said third-quarter gross margin, 37.2%, was 8.8 percentage points ahead of the second-quarter figure. And it expects the Q4 margin to come in 1 percentage point stronger than Q3.