W.R. Grace & Co., a supplier of catalysts to refineries, has received a $4 billion takeover offer from top shareholder 40 North after its shares slumped this year.
40 North, the multibillion-dollar investment firm linked to Standard Industries Inc., made an offer of $60 a share in cash to Columbia, Maryland-based W.R. Grace, according to a regulatory filing Monday. The unsolicited offer represents a 36% premium to the chemical company’s Friday close.
“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 wrote in a letter to W.R. Grace’s board.
40 North, which first invested in the company in 2013, is its biggest shareholder with a stake of almost 15%, according to data compiled by Bloomberg.
The investment firm is timing its approach with a downturn in some of W.R. Grace’s key end markets, including the refining, aerospace and automotive industries. Prices for catalysts used in the production of fuel and other chemicals have stagnated, with some customers switching to cheaper options.
40 North, which has hired Citigroup Inc. as an adviser, said it doesn’t expect any antitrust or regulatory issues and believes it could complete due diligence within four weeks if given access to the books. As part of any agreement, it would support W.R. Grace soliciting competing proposals during a “go-shop” period, according to the filing.
Kathleen Reiland, who represented 40 North on W.R. Grace’s board, abruptly resigned her director position almost a month ago due to disagreements over the company’s strategic direction. The move sparked speculation that the company may be a takeover target.
40 North’s $60-a-share bid is 50% above the last closing price before the announcement on Reiland’s departure. The offer represents “compelling value and certainty to shareholders” after the “significant underperformance” of its stock since W.R. Grace spun off its GCP Applied Technologies Inc. unit in 2016, according to 40 North.
Chief Executive Officer Hudson La Force has spearheaded an efficiency drive at W.R. Grace in a bid to cut costs and shore up finances amid the market downturn that’s hurt demand for transportation fuels. He’s targeting a $125 million boost to cash flow this year. W.R. Grace also makes specialty silica used in Covid-19 test kits and treatments.
With big energy companies now calling the peak in oil consumption at the end of this decade, W.R. Grace faces a threat to a market that’s been a revenue backbone for years. La Force told investors on an Oct. 28 conference call that demand for catalysts will remain resilient in the near term as the products improve refinery efficiency. Looking further ahead, the products will be needed as the market shifts toward cleaner fuels and recycled plastics.
This wouldn’t be the first time 40 North makes a potentially controversial move in in the chemicals industry. In 2017, the firm teamed up with hedge fund Corvex Management to block Clariant AG’s planned $6.4 billion takeover of Huntsman Corp. The two funds ended up selling their Clariant stake to Saudi Basic Industries Corp.
Standard Industries is an acquisitive privately-held global industrial company with a major presence in roofing and waterproofing. It has more than 15,000 employees in over 80 countries.