40 North Increases W.R. Grace Bid to $4.3 Billion After Snub

(Bloomberg) -- 40 North raised its bid for W.R. Grace & Co. to $4.3 billion in an effort to break the U.S. chemical company's resistance to a takeover and end what the investment firm sees as lackluster returns.

The No. 1 shareholder-turned-suitor, which is linked to Standard Industries Inc., increased its bid to $65 a share in cash from $60, Grace said in a statement Monday, confirming an earlier Bloomberg News report.

The new offer is 16% higher than Friday's close. It represents a 62% premium to Grace's closing price on Oct. 13, the day before news of the departure of a 40 North executive from Grace's board stoked takeover speculation.

“Grace's failure to even engage with us demonstrates a casual willingness to deprive shareholders of their most credible opportunity to realize immediate value,” 40 North principals David Winter and David Millstone wrote in a letter to Grace's board. “Grace's shareholders demand, and deserve, far better than this.”

Shares of Grace jumped as much as 7.1% in U.S. trading Monday. They were up 6.1% to $59.35 at 9:55 a.m. in New York, giving the company a market value of about $3.9 billion.

40 North will be hoping it can entice enough shareholders to put pressure on Chief Executive Officer Hudson La Force, now in his third year at the helm. Grace rejected the first bid in November, arguing it undervalued the catalyst maker, and said it has its own plan to accelerate growth.

As a private company, Grace would be able to “quickly and decisively undertake critical actions” to stem “its steady decline,” according to 40 North. It didn't specify any concrete measures.

The approach is timed with a downturn in some of Grace's key end markets. Prices for catalysts used in the production of fuel and other chemicals have stagnated, with some customers switching to cheaper options.

Makers of catalysts, which are used to accelerate the production of petrochemicals and plastics, also face challenges as the world moves away from a reliance on fossil fuels. Rival Haldor Topsoe A/S, which is backed by Singapore's Temasek Holdings Pte, last year announced a new strategy focused on developing technologies to reduce carbon emissions.

40 North is Grace's biggest shareholder with a stake of nearly 15%. Shares of the Columbia, Maryland-based company had declined nearly 20% in the 12 months through Friday, as the global coronavirus pandemic hurt industry and economies around the world.

The offer from 40 North isn't dependent on securing funding. Its advisers at Citigroup Inc. and JPMorgan Chase & Co., along with Deutsche Bank AG and BNP Paribas SA, have confirmed in writing they are “highly confident” they can arrange financing for the transaction, it said in the letter.

“We are firmly committed to this transaction and we stand ready to meet with you and your advisers immediately to discuss next steps and a mutually beneficial outcome for all constituencies,” according to the letter.