(Bloomberg) — 40 North, the investment firm linked to Standard Industries Inc., increased its takeover offer for W.R. Grace & Co. to $4.6 billion in a final push to win over the U.S. chemical producer.
The suitor, which is W.R. Grace’s biggest shareholder, raised its bid to $70 a share in cash, according to a statement and letter sent to Grace’s board on Thursday. The “best and final” offer, up from its previous bid of $65, comes after 40 North conducted customary due diligence, and the day after a standstill agreement between the companies expired.
The new offer is 17% higher than Wednesday’s close. It represents more than a 74% 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.
“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,” 40 North principals David Winter and David Millstone wrote in the letter. “It offers shareholders the opportunity to realize immediate, certain and attractive value.”
Shares of W.R. Grace jumped as much as 6% in New York trading Thursday, hitting as high as $63.50.
40 North is hoping its third offer can entice shareholders and win over Chief Executive Officer Hudson La Force, now in his third year at the helm. Grace said in January it’s open to selling itself to 40 North as long as a transaction reflects the company’s “full value,” opening the door to a deal after the bid was raised to $65 from $60 a share in November.
Still, 40 North signaled ongoing frustration with Grace’s board in Thursday’s letter. The investment firm claims due diligence was hampered by “limitations of information” provided by the company, and it does not “fully support” management’s “optimistic” growth expectations for its specialty catalysts business.
It also questioned the timing of Grace’s $570 million acquisition of Albemarle Corp.’s fine chemistry services business announced in February.
40 North is Grace’s biggest shareholder with a stake of nearly 15%. The firm’s latest proposal is subject only to confirmatory diligence, which is expected to take two weeks, and definitive documentation.
The approach was 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.
Shares of Columbia, Maryland-based Grace have gained 9.2% this year, valuing the company at almost $4 billion.
The offer from 40 North isn’t dependent on securing funding. The investment firm said it has lined up Citigroup Inc., JPMorgan Chase & Co., Deutsche Bank AG and BNP Paribas SA as financing banks.
(Updates with trading in fifth paragraph)
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