W. R. Grace Ready to Talk on Sale to 40 North

20.01.2021 - W. R. Grace said it is willing to discuss a sale to 40 North Management after the private investment group raised its offer for the specialty chemical and materials firm to $65 per share, representing a value of $4.3 billion. Last November, 40 North made a first and unsolicited offer of $60 per share – or $4 billion – that Grace swiftly rejected as undervaluing the company.

“Grace’s opportunities for continued growth and value creation are strong, particularly as our end markets recover from the disproportionate displacement resulting from the Covid-19 pandemic,” wrote Grace’s president and CEO Hudson La Force in a letter to 40 North principals David Millstone and David Winter, stating that “any transaction would need to be a price level that reflects the full value of Grace for its shareholders.”

La Force added that the company has experienced a rapid recovery from the pandemic and expects fourth quarter 2020 sales and gross margin to approach pre-pandemic levels. “Based on our recent growth investments and operating plan, we are confident in our robust opportunities for continued growth and high profitability,” he said.

40 North is Grace’s largest shareholder with a stake of roughly 15% stake. In 2019, the New York-based hedge fund pressured Grace to put two 40 North nominees on its board.

As part of its new bid, Winter and Millstone wrote to Grace’s board, chastising it for refusing to negotiate. “Grace’s failure to even engage with us demonstrates a casual willingness to deprive shareholders of their most credible opportunity to realize immediate value,” they said. “Grace’s shareholders demand, and deserve, far better than this.”

In the letter, 40 North also said it was offering to include a "go shop" provision that would allow the Grace board of directors to solicit competing proposals following execution of a definitive purchase agreement.

Grace said it would be willing to share information with 40 North that would support a full valuation of the company and it was prepared to move quickly with a draft confidentiality agreement.

Author: Elaine Burridge, Freelance Journalist