Making its “best and final offer,” the New York investment firm in pursuit of W.R. Grace & Co. raised its unsolicited bid for the Columbia-based specialty chemicals giant to $4.6 billion Thursday.
40 North Management LLC offered to buy all of Grace’s outstanding shares for $70 per share in cash, an increase over a previous offer of $65 per share in a deal valued at $4.3 billion.
40 North, the investment arm of New York-based building materials company Standard Industries and Grace’s largest shareholder, arrived at the higher offer after completing a due diligence review of the company, it said in a letter to the Grace board.
“We remain firm in our belief that Grace’s full potential for all stakeholders can best be achieved outside of the public markets with proactive, hands-on management,” said David J. Millstone and David S. Winter, co-CEOs and managing principals of 40 North.
In a response letter filed late Thursday with the Securities and Exchange Commission, Grace CEO and President Hudson La Force said the board would review the offer “in a timely manner.”
La Force asked Millstone and Winter for details of their debt and equity financing commitments.
Grace had rejected 40 North’s initial offer in November to buy the company for $4 billion, saying the bid “significantly” undervalued the company. After 40 North raised its bid to $65 a share, the company agreed to discuss a sale as part of an ongoing review of strategic alternatives.
The investment firm’s latest offer for Grace represents a 74% premium over Grace’s closing share price Oct. 13, the day before a 40 North representative resigned from Grace’s board, which fueled speculation about a takeover. Shares of Grace rose 2.2% on Thursday, closing at $61.19 each.
40 North believes it can reverse what it sees as years of underperformance at Grace 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, Massachusetts, and Grace’s silica and catalyst businesses, which kept the W.R. Grace name and remained based in Columbia.
In 40 North’s letter, it said it conducted its review of Grace “in as comprehensive a way as possible given the limitations of the information provided by the company.”
The review did not fully support management’s optimistic growth expectations for Grace’s specialty catalyst business, Millstone and Winter said. They also questioned the timing of Grace’s planned $570 million acquisition of Fine Chemistry Services, a pharmaceutical manufacturer. Grace announced plans in late February to acquire the manufacturer, a division of Charlotte, North Carolina-based chemical manufacturer Albemarle Corp.
The 40 North proposal does not include any financing contingency and does not require any internal corporate or shareholder approvals. It requires conducting legal and financial due diligence, which could take about two weeks, and drafting legal contracts.
“With Grace’s cooperation, we are confident we can receive all regulatory approvals in a timely manner,” the 40 North letter said.