UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
PURSUANT TO SECTION 14(a) OF THE
Filed by the Registrant ☒ | | | Filed by a party other than the Registrant ☐ |
Check the appropriate box:
| ☒ | Preliminary Proxy Statement |
☐ | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
☐ | Definitive Proxy Statement |
☐ | Definitive Additional Materials |
☐ | Soliciting Material under §240.14a-12 |
W. R. GRACE & CO.
| (Name of Person(s) Filing Proxy Statement, if other than the Registrant) |
Payment of Filing Fee (Check the appropriate box):
☐ | | | No fee required. | |||
☒ | | | Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. | |||
| | | (1) | | | Title of each class of securities to which transaction applies: | |
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| | | | | W. R. Grace & Co. common stock, par value $0.01 per share (“Grace common stock”) | ||
| | | (2) | | | Aggregate number of securities to which transaction applies: |
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| | | | | As of the close of business on May 19, 2021, the maximum number of shares of Grace common stock to which this transaction applies is estimated to be 67,492,523, which consists of: (a) 66,265,488 shares of Grace common stock outstanding; (b) 684,048 shares of Grace common stock issuable pursuant to outstanding options with an exercise price below the per share merger consideration of $70.00; (c) 273,662 shares of Grace common stock underlying restricted stock units that are not subject to performance vesting; and (d) 269,325 shares of Grace common stock underlying performance-based restricted stock units (based on achievement of applicable performance criteria at the actual level of performance (for awards issued in 2019) or target levels (in the case of awards issued in 2020 or 2021)). | ||
| | | (3) | | | Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): |
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| | | | | Solely for purposes of calculating the filing fee, the underlying value of the transaction was calculated based upon the sum of: (a) the product of 66,265,488 shares of Grace common stock and the per share merger consideration of $70.00; (b) the product of (i) 684,048 shares of Grace common stock issuable upon exercise of options with an exercise price below the per share merger consideration of $70.00 and (ii) the difference between $70.00 and the weighted average exercise price of such options of $61.63; (c) the product of 273,662 shares of Grace common stock underlying restricted stock units that are not subject to performance vesting and the per share merger consideration of $70.00; and (d) the product of 269,325 shares of Grace common stock underlying performance-based restricted stock units and the per share merger consideration of $70.00. | ||
| | | (4) | | | Proposed maximum aggregate value of transaction: |
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| | | | | $4,682,318,732 | ||
| | | (5) | | | Total fee paid: |
| | | | | $510,841 | ||
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| | | | | In accordance with Section 14(g) of the Securities Exchange Act of 1934, as amended, the filed fee was determined by multiplying $4,682,318,732 by 0.00010910. | ||
☐ | | | Fee paid previously with preliminary materials. | |||
☐ | | | Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. | |||
| | | (1) | | | Amount Previously Paid: |
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| | | (2) | | | Form, Schedule or Registration Statement No.: |
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| | | (3) | | | Filing Party: | |
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| | | (4) | | | Date Filed: | |
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PRELIMINARY PROXY STATEMENT—SUBJECT TO COMPLETION, DATED MAY 24, 2021
W. R. Grace & Co.
7500 Grace Drive
Columbia, Maryland 21044
[ ], 2021
Dear Grace Stockholder:
You are cordially invited to attend a special meeting (including any adjournments or postponements thereof, the “Special Meeting”) of stockholders of W. R. Grace & Co., a Delaware corporation (“Grace” or the “Company”) to be held at [ ], on [ ], 2021, at [ ], Eastern time.
At the Special Meeting, you will be asked to consider and vote on (i) a proposal to adopt the Agreement and Plan of Merger, dated as of April 26, 2021 (the “Merger Agreement”), by and among Gibraltar Acquisition Holdings LLC, a Delaware limited liability company (“Parent”), Gibraltar Merger Sub Inc., a Delaware corporation and a wholly owned subsidiary of Parent (“Merger Sub”), and Grace, (ii) a proposal to approve, on an advisory (non-binding) basis, the compensation that may be paid or become payable to Grace’s named executive officers that is based on or otherwise related to the Merger Agreement and the transactions contemplated by the Merger Agreement (the “Compensation Proposal”), and (iii) a proposal to adjourn the Special Meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to approve the proposal to adopt the Merger Agreement at the time of the Special Meeting (the “Adjournment Proposal”). Parent and Merger Sub are entities that are affiliated with Standard Industries Holdings Inc. (“Standard Industries Holdings”), the parent company of Standard Industries Inc., a privately held global industrial company. Standard Industries Holdings’ related investment platform 40 North Management LLC (“40 North”) is a long-standing stockholder of Grace. Pursuant to the terms of the Merger Agreement, Merger Sub will merge with and into Grace and the separate corporate existence of Merger Sub will cease, with Grace continuing as the surviving corporation (the “Merger”) and a wholly owned subsidiary of Parent.
If the Merger is completed, you will be entitled to receive $70.00 in cash, without interest and less any applicable withholding taxes, for each share of Grace common stock that you own, unless you have properly exercised your appraisal rights. This amount represents a premium of approximately 59% over Grace’s closing stock price of $44.05 on November 6, 2020, the last trading day prior to the announcement of 40 North’s initial proposal to acquire the Company on November 9, 2020.
The Board of Directors of Grace (the “Board of Directors”), after considering the factors more fully described in the enclosed proxy statement, has unanimously: (i) determined that it is in the best interests of Grace and its stockholders, and declared it advisable, to enter into the Merger Agreement; (ii) approved the execution, delivery and performance of the Merger Agreement by Grace and the consummation of the transactions contemplated by the Merger Agreement; and (iii) resolved to recommend that holders of Grace common stock adopt the Merger Agreement and the consummation of the transactions contemplated thereby. The Board of Directors unanimously recommends that you vote: (1) “FOR” the proposal to adopt the Merger Agreement; (2) “FOR,” on an advisory (non-binding) basis, the Compensation Proposal; and (3) “FOR” the Adjournment Proposal.
The enclosed proxy statement provides detailed information about the Special Meeting, the Merger Agreement and the Merger. A copy of the Merger Agreement is attached as Annex A to the proxy statement.
The proxy statement also describes the actions and determinations of the Board of Directors in connection with its evaluation of the Merger Agreement and the Merger. You should carefully read and consider the entire enclosed proxy statement and its annexes, including, but not limited to, the Merger Agreement, as they contain important information about, among other things, the Merger and how it affects you.
Whether or not you plan to attend the Special Meeting in person, please sign, date and return, as promptly as possible, the enclosed proxy card in the accompanying prepaid reply envelope or grant your proxy electronically over the Internet or by telephone (using the instructions provided in the enclosed proxy card). If you attend the Special Meeting and vote in person, your vote will revoke any proxy that you have previously submitted.
If you hold your shares in “street name,” you should instruct your bank, broker or other nominee how to vote your shares in accordance with the voting instruction form that you will receive from your bank, broker or other nominee. Your bank, broker or other nominee cannot vote on any of the proposals, including the proposal to adopt the Merger Agreement, without your instructions.
Your vote is very important, regardless of the number of shares that you own. We cannot complete the Merger unless the proposal to adopt the Merger Agreement is approved by the affirmative vote of the holders of at least a majority of the outstanding shares of Grace common stock entitled to vote at the Special Meeting. If you fail to vote in person or by proxy, or fail to instruct your broker on how to vote, it will have the same effect as a vote “AGAINST” the proposal to adopt the Merger Agreement.
If you have any questions or need assistance voting your shares, please contact our proxy solicitor:
MacKenzie Partners, Inc.
Collect: (212) 929-5550
Toll-Free: (800) 322-2885
E-mail: proxy@mackenziepartners.com
On behalf of the Board of Directors, I thank you for your support and appreciate your consideration of these matters.
Sincerely, | | | |
 | | | |
Hudson La Force | | | |
President and Chief Executive Officer | |||
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The accompanying proxy materials to you overstatement is dated [ ], 2021 and, together with the internet. This e-proxy process expedites your receiptenclosed form of proxy materials, lowers our costs, and reduces the environmental impact of our Annual Meeting. Today, we sent to most of our shareholders a Notice of Internet Availability of Proxy Materials containing instructionscard, is first being mailed on how to access our 2019 Proxy Statement and 2018 Annual Report to Shareholders and how to vote via the internet. Other shareholders will receive a copy of the proxy statement and annual report by mail or e-mail. The matters to be acted upon at the Annual Meeting are described in the Notice of 2019 Annual Meeting of Shareholders and in the 2019 Proxy Statement.about [ ], 2021.
PRELIMINARY PROXY STATEMENT—SUBJECT TO COMPLETION, DATED MAY 24, 2021
W. R. Grace & Co.
7500 Grace Drive
Columbia, Maryland 21044
NOTICE OF 2019 ANNUALSPECIAL MEETING OF SHAREHOLDERS
STOCKHOLDERS
purposes:
| 1. | |
| 2. | To consider and vote on the proposal to approve, on an advisory (non-binding) basis, the compensation that may be paid or become payable to Grace’s named executive officers that is based on or otherwise relates to the Merger Agreement and the transactions contemplated by the Merger Agreement (the “Compensation Proposal”); and |
| 3. |
The Board of Directors has fixedunanimously recommends that you vote: (1) “FOR” the close of businessproposal to adopt the Merger Agreement; (2) “FOR,” on March 12, 2019, asan advisory (non-binding) basis, the record date forCompensation Proposal; and (3) “FOR” the determination of shareholders entitled to notice of, and to vote at, the Annual Meeting. This notice and the accompanying proxy materials are sent to you by order of the Board of Directors.Adjournment Proposal.
| | | By Order of the Board of Directors, | |
| | | ||
| | | Cherée H. Johnson | |
| | | Senior Vice President, General Counsel and Secretary |
Dated: [ ], 2021
YOUR VOTE IS IMPORTANT
WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING IN PERSON, WE ENCOURAGE YOU TO SUBMIT YOUR PROXY AS PROMPTLY AS POSSIBLE: (1) BY TELEPHONE; (2) THROUGH THE INTERNET; OR (3) BY SIGNING AND DATING THE ENCLOSED PROXY CARD AND RETURNING IT IN THE POSTAGE-PAID ENVELOPE PROVIDED. You may revoke your proxy or change your vote at any time before it is voted at the Special Meeting.
If you hold your shares in “street name,” you should instruct your bank, broker or other nominee how to vote your shares in accordance with the voting instruction form that you will receive from your bank, broker or other nominee. Your broker or other agent cannot vote on any of the proposals, including the proposal to adopt the Merger Agreement, without your instructions.
If you are a Grace Stockholder of record, voting in person at the Special Meeting will revoke any proxy that you previously submitted. If you hold your shares through a bank, broker or other nominee, you must obtain a “legal proxy” in order to vote in person at the Special Meeting.
If you fail to (1) return your proxy card, (2) grant your proxy electronically over the Internet or by telephone or (3) vote in person at the Special Meeting, your shares will not be counted for purposes of determining whether a quorum is present at the Special Meeting and, if a quorum is present, will have the same effect as a vote “AGAINST” the proposal to adopt the Merger Agreement but will have no effect on the Compensation Proposal or the Adjournment Proposal.
You should carefully read and consider the entire accompanying proxy statement and its annexes, including, but not limited to, the Merger Agreement, along with all of the documents incorporated by reference into the accompanying proxy statement, as they contain important information about, among other things, the Merger and how it affects you. If you have any questions concerning the Merger Agreement, the Merger, the Special Meeting or the accompanying proxy statement, would like additional copies of the accompanying proxy statement or need help voting your shares of Grace common stock, please contact our proxy solicitor:
MacKenzie Partners, Inc.
Collect: (212) 929-5550
Toll-Free: (800) 322-2885
E-mail: proxy@mackenziepartners.com
i
This summary highlights selected information from this proxy statement related to the merger of Gibraltar Merger Sub Inc. with and into W. R. Grace & Co. (the “Merger”) and may not contain all of the information that is important to you. To understand the Merger more fully and for a more complete description of the legal terms of the Merger, you should carefully read and consider this entire proxy statement and the annexes to this proxy statement, including, but not limited to, the Merger Agreement (as defined below), along with all of the documents to which we refer in this proxy statement, as they contain important information about, among other things, the Merger and how it affects you. You may obtain the information incorporated by reference in this proxy statement without charge by following the instructions under the caption “Where You Can Find More Information.” The Merger Agreement is attached as Annex A to this proxy statement. You should carefully read and consider the entire Merger Agreement, which is the legal document that governs the Merger.
Except as otherwise specifically noted in this proxy statement, “Grace,” “we,” “our,” “us,” the “Company” and similar words refer to W. R. Grace & Co. Throughout this proxy statement, we refer to Gibraltar Acquisition Holdings LLC as “Parent” and Gibraltar Merger Sub Inc. as “Merger Sub.” In addition, throughout this proxy statement we refer to the Agreement and Plan of Merger, dated April 26, 2021, by and among Parent, Merger Sub and Grace as the “Merger Agreement,” our common stock, par value $0.01 per share, as “Grace common stock,” and the holders of Grace common stock as “Grace Stockholders.” Unless indicated otherwise, any other capitalized term used herein but not otherwise defined herein has the meaning assigned to such term in the Merger Agreement.
W. R. Grace & Co.
Grace, a Delaware corporation, is a leading global specialty chemical company. Grace’s two industry-leading business segments—Catalysts Technologies and Materials Technologies—provide innovative products, technologies, and services that enhance the products and processes of our customers around the world. With approximately 4,000 employees, Grace operates and/or sells to customers in over 60 countries. More information about Grace is available at www.grace.com. Grace common stock is listed on the New York Stock Exchange (“NYSE”) under the symbol “GRA.”
Gibraltar Acquisition Holdings LLC
Parent was formed on April 22, 2021, solely for the purpose of engaging in the transactions contemplated by the Merger Agreement, and has not engaged in any business activities other than in connection with the transactions contemplated by the Merger Agreement and arranging of the equity financing and debt financing in connection with the Merger.
Gibraltar Merger Sub Inc.
Merger Sub is a wholly owned subsidiary of Parent and was formed on April 23, 2021, solely for the purpose of engaging in the transactions contemplated by the Merger Agreement, and has not engaged in any business activities other than in connection with the transactions contemplated by the Merger Agreement and arranging of the equity financing and debt financing in connection with the Merger.
Parent and Merger Sub are each affiliated with Standard Industries Holdings Inc. (“Standard Industries Holdings”), the parent company of Standard Industries Inc. (“Standard Industries”), a privately held global industrial company operating in over 80 countries with over 15,000 employees. The Standard Industries ecosystem spans a broad array of holdings, technologies and investments—including both public and private companies from early to late-stage—as well as world-class building materials assets and next-generation solar solutions. Throughout its 140-year history, Standard Industries has leveraged its deep industry expertise and vision to create outsize value across its businesses, which today include operating companies GAF, BMI, Siplast, GAF Energy, Schiedel and SGI, as well as related businesses 40 North Management LLC, a multi-billion-dollar investment platform (“40 North”), 40 North Ventures and Winter Properties. More information about Standard Industries is available at www.standardindustries.com. Standard Industries Holdings’ related investment platform 40 North is a long-standing stockholder of Grace. At the Effective Time (as defined in the section of this proxy statement captioned “—The Merger”), the Surviving Corporation (as defined in the section of the proxy statement captioned “—The Merger”), will be a wholly owned subsidiary of Parent.
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In connection with the transactions contemplated by the Merger Agreement, (i) Standard Industries Holdings has provided Parent with an equity commitment of $3,516 million and (ii) Parent has obtained debt financing commitments in an aggregate amount of $3,455 million ($3,905 million including the revolving credit facility commitment) from JPMorgan Chase Bank, N.A., BNP Paribas, BNP Paribas Securities Corp., Citigroup Global Markets Inc. on behalf of certain entities affiliated with Citi, Deutsche Bank AG New York Branch, Deutsche Bank AG Cayman Islands Branch and Deutsche Bank Securities Inc. Such amounts will be used to fund the aggregate purchase price required to be paid at the closing of the Merger and to also fund certain other payments (including the Merger Amounts (as defined in the section of this proxy statement captioned “—Financing of the Merger”)), subject to the terms and conditions of the Merger Agreement. In addition, Standard Industries Holdings has agreed to guarantee the payment of certain liabilities and obligations of Parent under the Merger Agreement, subject to an aggregate cap equal to $290 million, including any termination fee and amounts in respect of certain reimbursement and indemnification obligations of Parent and Merger Sub for certain costs, expenses or losses incurred or sustained by Grace, as specified in the Merger Agreement. For more information, please see the section of this proxy statement captioned “—Financing of the Merger.”
Upon the terms and subject to the conditions of the Merger Agreement, Merger Sub will merge with and into Grace and the separate corporate existence of Merger Sub will cease, with Grace continuing as the surviving corporation and as a wholly owned subsidiary of Parent (the “Surviving Corporation”). As a result of the Merger, Grace common stock will no longer be publicly traded and will be delisted from NYSE. In addition, Grace common stock will be deregistered under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Grace will no longer file periodic reports with the U.S. Securities and Exchange Commission (the “SEC”). If the Merger is completed, you will not own any shares of the capital stock of the Surviving Corporation. The time at which the Merger will become effective will occur upon the filing of a certificate of merger with the Secretary of State of the State of Delaware in accordance with the applicable provision of the General Corporation Law of the State of Delaware (the “DGCL”) (the time of such filing and the acceptance for record by the Secretary of State of the State of Delaware, or such later time as may be agreed in writing by Parent and Grace and specified in the certificate of merger, being referred to herein as the “Effective Time”).
Grace Common Stock
At the Effective Time, each then-outstanding share of Grace common stock (other than shares of Grace common stock (i) held by Grace as treasury stock, (ii) owned directly or indirectly by Parent, Merger Sub or any other subsidiary of Parent, (iii) owned by any wholly owned subsidiary of Grace or (iv) owned by Grace Stockholders who have properly and validly exercised their statutory rights of appraisal in respect of such shares of Grace common stock in accordance with Section 262 of the DGCL, collectively, the “Excluded Shares”) will be cancelled and retired and automatically converted into the right to receive an amount in cash equal to $70.00 (the “Merger Consideration”), without interest thereon and less any applicable withholding taxes.
Prior to the Effective Time, Parent will deposit (or cause to be deposited) an amount of cash equal to the aggregate Merger Consideration with a designated paying agent in trust for the benefit of the Grace Stockholders. For more information, please see the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—Exchange and Payment Procedures.”
After the Merger is completed, you will have the right to receive the Merger Consideration, but you will no longer have any rights as a stockholder (except that stockholders who properly exercise their appraisal rights may have the right to receive payment for the “fair value” of their shares determined pursuant to an appraisal proceeding, as contemplated by Delaware law). For more information, please see the section of this proxy statement captioned “The Merger—Appraisal Rights.”
Treatment of Company Equity Awards
Treatment of Company Options and Company SARs. The Merger Agreement provides that each option to purchase shares of Grace common stock (each, a “Company Option”) and each stock appreciation right with respect to shares of Common Stock (each, a “Company SAR”) that is outstanding immediately prior to the
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Effective Time will vest at closing and be converted into the right to receive an amount in cash equal to the product of the Merger Consideration (less the applicable exercise price) and the number of shares of Common Stock covered by such Company Option or Company SAR (without interest and less applicable withholding taxes). Payment of these cash amounts will be paid within three (3) business days after the Effective Time. Any Company Option or Company SAR that has a per share exercise price that is greater than or equal to the Merger Consideration will be cancelled at the Effective Time for no consideration or payment.
Treatment of Company RSU Awards and Company Performance Share Awards. The Merger Agreement provides that each restricted stock unit award (each, a “Company RSU Award”) and each performance-based unit award relating to shares of Common Stock (each, a “Company Performance Share Award” and, collectively with the Company Options, Company SARs and Company RSU Awards, the “Company Equity Awards”) that is outstanding immediately prior to the Effective Time will be assumed and converted into the right to receive an amount in cash (without interest) equal to the product obtained by multiplying the Merger Consideration by the number of shares of Common Stock covered by such award immediately prior to the Effective Time, which converted cash award will be subject to continued service vesting and other terms as set forth in the Merger Agreement.
For more information, please see the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—Merger Consideration—Treatment of Company Equity Awards.”
The receipt of cash by Grace Stockholders in exchange for shares of Grace common stock in the Merger will be a taxable transaction to Grace Stockholders for U.S. federal income tax purposes. Such receipt of cash by each Grace Stockholder that is a U.S. Holder (as defined under the section, “The Merger—Material U.S. Federal Income Tax Consequences of the Merger”) generally will result in the recognition of gain or loss in an amount equal to the difference, if any, between the amount of cash that such U.S. Holder receives in the Merger and such U.S. Holder’s adjusted tax basis in the shares of Grace common stock surrendered pursuant to the Merger.
Grace Stockholders should read the section of this proxy statement captioned “The Merger—Material U.S. Federal Income Tax Consequences of the Merger.”
Grace Stockholders should consult their tax advisors in light of their particular circumstances and any consequences arising under U.S. federal, state, local and non-U.S. income and other tax consequences relating to the Merger.
If the Merger is consummated and certain conditions are met, Grace Stockholders who continuously hold shares of Grace common stock through the Effective Time, who do not vote in favor of the adoption of the Merger Agreement and who properly demand appraisal of their shares and who do not withdraw their demands or otherwise lose their rights to seek appraisal will be entitled to seek appraisal of their shares in connection with the Merger under Section 262 of the DGCL. This means that Grace Stockholders may be entitled to have their shares of Grace common stock appraised by the Delaware Court of Chancery, and to receive payment in cash of the “fair value” of their shares of Grace common stock, exclusive of any elements of value arising from the accomplishment or expectation of the Merger, together with interest to be paid on the amount determined to be fair value, if any, as determined by the court (or in certain circumstances described in further detail in the section of this proxy statement captioned “The Merger—Appraisal Rights,” on the difference between the amount determined to be the fair value and the amount paid by the Surviving Corporation in the Merger to each stockholder entitled to appraisal prior to the entry of judgment in any appraisal proceeding). Due to the complexity of the appraisal process, Grace Stockholders who wish to seek appraisal of their shares are encouraged to seek the advice of legal counsel with respect to the exercise of appraisal rights.
Grace Stockholders considering seeking appraisal should be aware that the fair value of their shares as determined pursuant to Section 262 of the DGCL could be more than, the same as, or less than the value of the consideration that they would receive pursuant to the Merger Agreement if they did not seek appraisal of their shares of Grace common stock.
To exercise appraisal rights, Grace Stockholders must: (i) submit a written demand for appraisal to Grace before the vote is taken on the proposal to adopt the Merger Agreement; (ii) not submit a proxy or otherwise
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vote in favor of the proposal to adopt the Merger Agreement; (iii) continue to hold shares of Grace common stock of record through the Effective Time; and (iv) strictly comply with all other procedures for exercising appraisal rights under the DGCL. Failure to follow exactly the procedures specified under the DGCL may result in the loss of appraisal rights. In addition, the Delaware Court of Chancery will dismiss appraisal proceedings in respect of Grace unless certain stock ownership conditions are satisfied by the Grace Stockholders seeking appraisal. The DGCL requirements for exercising appraisal rights are described in further detail in this proxy statement, which is qualified in its entirety by Section 262 of the DGCL, the relevant section of the DGCL regarding appraisal rights. A copy of Section 262 of the DGCL is reproduced in Annex D to this proxy statement. If you hold your shares of Grace common stock through a bank, broker or other nominee and you wish to exercise appraisal rights, you should consult with your bank, broker or other nominee to determine the appropriate procedures for the making of a demand for appraisal on your behalf by your bank, broker or other nominee. For more information, please see the section of this proxy statement captioned “The Merger—Appraisal Rights.”
HSR Act, U.S. Antitrust Matters and Other Regulatory Approvals
Under the Merger Agreement, the Merger cannot be completed until the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”), has expired or been terminated and approvals, consents, waivers or clearances under the antitrust laws of certain specified foreign jurisdictions have been obtained. Grace and Parent made the filings required under the HSR Act on May 10, 2021.
Commitment to Obtain Approvals
Grace and Parent are each required to take (or cause to be taken), do (or cause to be done), and assist and cooperate in doing all things necessary or advisable to consummate the Merger as promptly as reasonably practicable. Additionally, Parent is required to take all actions necessary, proper or advisable to avoid or eliminate each and every impediment, including any judgment, that may be asserted by a governmental entity pursuant to any antitrust law with respect to the Merger. This includes, if required by regulatory authorities, (i) agreeing to sell, divest or dispose of any assets or businesses of Parent or its affiliates or Grace or its subsidiaries and (ii) agreeing to any limitation on the conduct of Parent or its affiliates (including, after the closing of the Merger, the Surviving Corporation) proposed by a governmental entity enforcing applicable laws. In connection with Parent’s effectuation of these transactions or restrictions, Grace is required to provide such reasonable assistance as Parent may reasonably request; provided that any such transactions or restrictions are subject to, conditioned upon and effective only after the closing of the Merger. See the section of this proxy statement captioned “The Merger—Regulatory Approvals Required for the Merger.”
The obligations of Grace, Parent and Merger Sub, as applicable, to consummate the Merger are subject to the satisfaction or waiver of customary conditions, including (among other conditions), the following:
the adoption of the Merger Agreement by the requisite affirmative vote of stockholders;
the expiration or termination of the applicable waiting period under the HSR Act and the receipt of approvals, consents, waivers or clearances under the antitrust laws of certain specified foreign jurisdictions;
the absence of any laws or judgments issued by a governmental entity of competent jurisdiction making the Merger illegal or otherwise prohibiting the Merger;
in the case of Parent and Merger Sub, no “Company Material Adverse Effect” having occurred since the date of the Merger Agreement (as defined in the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—Representations and Warranties”);
the accuracy of the representations and warranties of Grace, Parent and Merger Sub in the Merger Agreement, generally subject to a materiality qualification, as of the date of the Merger Agreement and as of the closing of the Merger as if made as of such time (except to the extent expressly made as of an earlier date, in which case as of such earlier date); and
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the performance in all material respects by Grace, Parent and Merger Sub of their respective obligations required to be performed by them under the Merger Agreement at or prior to the Effective Time.
The obligation of Parent and Merger Sub to consummate the Merger is not subject to any financing condition. We anticipate that the total amount of funds necessary to complete the Merger and the related transactions, and to pay the fees and expenses required to be paid at the closing of the Merger by Parent and Merger Sub under the Merger Agreement, will be approximately $7,151 million. This amount includes funds needed to: (i) pay Grace Stockholders the amounts due under the Merger Agreement for their Grace common stock, (ii) make payments in respect of our outstanding Company Equity Awards payable at closing of the Merger pursuant to the Merger Agreement, (iii) repay or refinance certain outstanding indebtedness of Grace and its subsidiaries contemplated by, or required in connection with the transactions described in, the Merger Agreement or the Commitment Letters (as defined below) and (iv) pay any fees and expenses of or payable by Parent, Merger Sub or the Surviving Corporation at the closing of the Merger (collectively, the “Merger Amounts”).
Standard Industries Holdings has committed to contribute or cause to be contributed to Parent at the closing of the Merger an aggregate amount in cash equal to $3,516 million, subject to the terms and conditions set forth in an equity commitment letter, dated as of April 26, 2021 (the “Equity Commitment Letter”). Grace is an express third-party beneficiary of the Equity Commitment Letter and may cause Standard Industries Holdings to perform its funding obligations under the Equity Commitment Letter subject to (i) the limitations and conditions set forth in the Equity Commitment Letter and (ii) the terms and conditions of the Merger Agreement. Standard Industries Holdings has announced that its equity commitment will be supported by (a) the available cash of its subsidiary, Standard Industries Inc., (b) up to $2,500 million in proceeds from a secured term loan and (c) a financing commitment of $600 million by certain investment funds affiliated with Apollo Global Management.
Pursuant to the limited guaranty delivered by Standard Industries Holdings in favor of Grace, dated as of April 26, 2021 (the “Guaranty”), Standard Industries Holdings has agreed to guarantee the payment of certain liabilities and obligations of Parent under the Merger Agreement, subject to an aggregate cap equal to $290 million, including any termination fee and amounts in respect of certain reimbursement and indemnification obligations of Parent and Merger Sub for certain costs, expenses or losses incurred or sustained by Grace, as specified in the Merger Agreement.
In addition, in connection with the Merger Agreement, Parent entered into a debt commitment letter, dated as of April 26, 2021 (as amended, supplemented or otherwise modified, the “Debt Commitment Letter” and, together with the Equity Commitment Letter, the “Commitment Letters”) with JPMorgan Chase Bank, N.A., BNP Paribas, BNP Paribas Securities Corp., Citigroup Global Markets Inc. on behalf of certain entities affiliated with Citi, Deutsche Bank AG New York Branch, Deutsche Bank AG Cayman Islands Branch and Deutsche Bank Securities Inc., pursuant to which the lenders have committed to provide, upon certain terms and subject to certain conditions, Parent with Debt Financing (as defined in the section of this proxy statement captioned “The Merger—Financing of the Merger”) in an aggregate principal amount of $3,455 million ($3,905 million including the revolving credit facility commitment). For more information, please see the section of this proxy statement captioned “The Merger—Financing of the Merger.”
Each of Parent and Merger Sub must use reasonable best efforts to take, or cause to be taken, all actions and do, or cause to be done, all things necessary, proper or advisable to arrange, consummate and obtain the financing described in the Commitment Letters on the terms and subject only to the conditions (including the “flex” provisions contained in any related fee letter) set forth in the Commitment Letters and the Merger Agreement.
Grace has agreed to use its reasonable best efforts to provide, and to use its reasonable efforts to cause its representatives to provide, to Parent and Merger Sub, at Parent’s sole cost and expense, such cooperation as is customary and reasonably requested by Parent in connection with the arrangement of the financing contemplated by the Debt Commitment Letter, subject to the terms set forth in the Merger Agreement. For more information, please see the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—Cooperation with Debt Financing.”
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The affirmative vote of the holders of a majority of the outstanding shares of Grace common stock entitled to vote at the Special Meeting is required to adopt the Merger Agreement. As of the Record Date, [ ] votes constitute a majority of the outstanding shares of Grace common stock entitled to vote at the Special Meeting. Approval of each of (i) the proposal to approve, on an advisory (non-binding) basis, the compensation that may be paid or become payable to Grace’s named executive officers that is based on or otherwise relates to the Merger Agreement and the transactions contemplated by the Merger Agreement (the “Compensation Proposal”) and (ii) the proposal to adjourn the Special Meeting (the “Adjournment Proposal”), whether or not a quorum is present, requires the affirmative vote of a majority of the shares of Grace common stock present in person or represented by proxy at the Special Meeting and entitled to vote on the subject matter. The approval of the Compensation Proposal is advisory (non-binding) and is not a condition to the completion of the Merger.
As of the Record Date, our directors and executive officers beneficially owned and were entitled to vote, in the aggregate, [ ] shares of Grace common stock, representing approximately [ ]% of the shares of Grace common stock outstanding as of the Record Date (and approximately [ ]% of the shares of Grace common stock outstanding when taking into account Company Equity Awards held, in the aggregate, by our directors and executive officers).
40 North Latitude Master Fund Ltd. (the “Supporting Stockholder”), an affiliate of 40 North, entered into a voting agreement with the Company, dated as of April 26, 2021 (the “Voting Agreement”). The Supporting Stockholder beneficially owns 9,865,008 shares of Grace common stock representing approximately 14.9% of the outstanding Grace common stock as of May 13, 2021. Pursuant to the Voting Agreement, the Supporting Stockholder has agreed, among other things, to vote its shares of Grace common stock in favor of the proposal to adopt the Merger Agreement (as described in the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—Company Board Recommendation; Company Adverse Recommendation Change”). For more information, see the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—The Voting Agreement.”
We currently expect that our directors and executive officers will vote all of their respective shares of Grace common stock: (1) “FOR” the proposal to adopt the Merger Agreement; (2) “FOR,” on an advisory (non-binding) basis, the Compensation Proposal; and (3) “FOR” the Adjournment Proposal.
Date, Time and Place
A special meeting of Grace Stockholders to consider and vote on the proposal to adopt the Merger Agreement will be held at [ ], on [ ], 2021, at [ ], Eastern time (the “Special Meeting”).
Record Date; Shares Entitled to Vote
You are entitled to vote at the Special Meeting if you owned shares of Grace common stock at the close of business on [ ], 2021 (the “Record Date”). Each holder of Grace common stock will be entitled to one (1) vote for each such share owned at the close of business on the Record Date.
Quorum
As of the Record Date, there were [ ] shares of Grace common stock outstanding and entitled to vote at the Special Meeting. The holders of a majority of the shares of Grace common stock issued and outstanding and entitled to vote, present in person or represented by proxy, will constitute a quorum at the Special Meeting.
The Board of Directors has unanimously: (i) determined that it is in the best interests of Grace and its stockholders, and declared it advisable, to enter into the Merger Agreement; (ii) approved the execution, delivery and performance of the Merger Agreement by Grace and the consummation of the transactions contemplated by the Merger Agreement; and (iii) resolved to recommend that Grace Stockholders adopt the Merger Agreement and the consummation of the transactions contemplated thereby.
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The Board of Directors unanimously recommends that you vote: (1) “FOR” the proposal to adopt the Merger Agreement; (2) “FOR,” on an advisory (non-binding) basis, the Compensation Proposal; and (3) “FOR” the Adjournment Proposal.
Prior to the adoption of the Merger Agreement by Grace Stockholders, under certain circumstances, the Board of Directors may withdraw or change the foregoing recommendation if it determines in good faith (after consultation with its financial advisors and its outside legal counsel and after taking into account any changes to the terms of the Merger Agreement proposed by Parent during the notice and negotiation period described below) that failure to do so would be inconsistent with the Board of Directors’ fiduciary duties to stockholders under applicable law. However, the Board of Directors cannot withdraw or change the foregoing recommendation unless it complies with certain procedures in the Merger Agreement, including, but not limited to, negotiating with Parent and its representatives in good faith over a five (5) business day period (three (3) business days in the case of subsequent revisions to the material terms of a Superior Company Proposal (as defined in the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—Company Takeover Proposals; No Solicitation”)), after which the Board of Directors shall have determined that the failure to make a Company Adverse Recommendation Change (as defined in the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—Company Board Recommendation; Company Adverse Recommendation Change”) would be inconsistent with the Board of Directors’ fiduciary duties to stockholders under applicable law.
The termination of the Merger Agreement by Grace following the Board of Directors’ authorization for Grace to enter into a definitive agreement to consummate an alternative transaction contemplated by a Superior Company Proposal (as defined in the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—Company Takeover Proposals; No Solicitation”) will result in the payment by Grace of a termination fee of $141 million. For more information, please see the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—Company Board Recommendation; Company Adverse Recommendation Change.”
Goldman Sachs & Co. LLC (“Goldman Sachs”) delivered its opinion to the Board of Directors of Grace that, as of April 26, 2021 and based upon and subject to the factors and assumptions set forth therein, the Merger Consideration to be paid to the holders (other than Parent and its affiliates) of Grace common stock pursuant to the Merger Agreement was fair from a financial point of view to such holders.
The full text of the written opinion of Goldman Sachs, dated April 26, 2021, which sets forth assumptions made, procedures followed, matters considered and limitations on the review undertaken in connection with the opinion, is attached as Annex B to this proxy statement. Goldman Sachs provided advisory services and its opinion for the information and assistance of the Board of Directors in connection with its consideration of the Merger. The Goldman Sachs opinion is not a recommendation as to how any holder of Grace common stock should vote with respect to the Merger or any other matter.
For more information, see the section of this proxy statement captioned “The Merger—Opinion of Goldman Sachs & Co. LLC.”
At the April 25, 2021 meeting of the Board of Directors, Moelis & Company LLC (“Moelis”), financial advisor to Grace, rendered its oral opinion to the Board of Directors, confirmed by the delivery of a written opinion dated April 26, 2021, addressed to the Board of Directors to the effect that, as of the date of such opinion and based upon and subject to the assumptions made, procedures followed, matters considered and limitations on the review undertaken, the Merger Consideration to be received in the Merger by the holders of the Grace common stock (other than the Supporting Stockholder, Parent, Merger Sub, any other subsidiary of Parent, Grace or any wholly owned subsidiary of Grace) was fair, from a financial point of view, to such holders.
The full text of Moelis’ written opinion dated April 26, 2021, which sets forth the assumptions made, procedures followed, matters considered and limitations on the review undertaken in connection with the opinion, is attached as Annex C to this proxy statement and is incorporated herein by reference. Moelis’ opinion was provided for the use and benefit of the Board of Directors (solely in its capacity as such) in its
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evaluation of the Merger. Moelis’ opinion is limited solely to the fairness, from a financial point of view, of the Merger Consideration to be received by the holders of the Grace common stock (other than the Supporting Stockholder, Parent, Merger Sub, any other subsidiary of Parent, Grace or any wholly owned subsidiary of Grace) in the Merger and does not address Grace’s underlying business decision to effect the Merger or the relative merits of the Merger as compared to any alternative business strategies or transactions that might be available to Grace. Moelis’ opinion does not constitute a recommendation as to how any holder of securities should vote or act with respect to the Merger or any other matter.
For more information, see the section of this proxy statement captioned “The Merger—Opinion of Moelis & Company LLC.”
When considering the foregoing recommendation of the Board of Directors that you vote to approve the proposal to adopt the Merger Agreement, Grace Stockholders should be aware that Grace’s directors and executive officers may have interests in the Merger that are different from, or in addition to, Grace Stockholders more generally. In (i) evaluating and negotiating the Merger Agreement, (ii) approving the Merger Agreement and the Merger and (iii) recommending that the Merger Agreement be adopted by stockholders, the Board of Directors was aware of and considered these interests, among other matters, to the extent that these interests existed at the time. These interests include:
at the Effective Time, each Company Equity Award held by an executive officer or director will receive the treatment described in the section of this proxy statement captioned “The Merger—Interests of Executive Officers and Directors of Grace in the Merger—Treatment of Company Equity Awards”;
eligibility of Grace’s executive officers to receive severance payments and benefits under their change in control severance agreements with Grace and equity award vesting acceleration on certain terminations of employment under the Grace stock incentive plans, as described in more detail in the section of this proxy statement captioned “The Merger—Interests of Executive Officers and Directors of Grace in the Merger”;
eligibility of Grace’s executive officers to receive a retention bonus equal to 50% of the severance payment (as defined in the applicable change in control severance agreement) that would be payable under each such executive’s change in control severance agreement, subject to continued employment through the first anniversary of the closing (and in the event any such executive’s employment is terminated by Grace prior to the first anniversary of the closing, the executive would remain eligible to receive a severance payment as set forth in the executive’s change in control severance agreement); and
continued indemnification and directors’ and officers’ liability insurance to be provided by the Surviving Corporation.
If the proposal to adopt the Merger Agreement is approved, the shares of Grace common stock held by Grace directors and executive officers will be treated in the same manner as outstanding shares of Grace common stock held by all other stockholders. For more information, see the section of this proxy statement captioned “The Merger—Interests of Executive Officers and Directors of Grace in the Merger.”
Under the Merger Agreement, Grace must not, and must cause its subsidiaries not to, and must use reasonable best efforts to cause its affiliates and any of its and their respective representatives not to, directly or indirectly: (i) solicit, initiate or knowingly encourage, induce or facilitate any Company Takeover Proposal (as defined in the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—Company Takeover Proposals; No Solicitation”) or any inquiry or proposal that would reasonably be expected to lead to a Company Takeover Proposal; or (ii) continue, enter into, maintain, participate or engage in any discussions or negotiations with any person regarding, furnish to any such person any non-public information with respect to, any Company Takeover Proposal or any inquiry or proposal that would reasonably be expected to lead to a Company Takeover Proposal. In addition, Grace must, and must cause its affiliates and its and their respective representatives to, (a) immediately cease and cause to be terminated all existing discussions, solicitations or negotiations with or of any person with respect to any Company Takeover Proposal, or any inquiry or proposal that would reasonably be expected to lead to a Company Takeover Proposal,
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(b) request the prompt return or destruction of all confidential information previously furnished and (c) terminate all physical and electronic data room access previously granted to any such person or its representatives.
Notwithstanding the foregoing restrictions, under certain specified circumstances, from the date of the Merger Agreement until the adoption of the Merger Agreement by the Grace Stockholders, Grace may, among other things, furnish information to, and participate in discussions and negotiations with, a person in respect of a bona fide, written Company Takeover Proposal made after the date of the Merger Agreement that does not result from a material breach of Grace’s non-solicitation obligations, as described in the immediately preceding paragraph if, subject to complying with certain procedures described in the subsequent paragraph, the Board of Directors determines in good faith (after consultation with its financial advisors and its outside legal counsel) that such Company Takeover Proposal constitutes or could reasonably be expected to lead to a Superior Company Proposal, and, in each case, if (and only if), the Board of Directors determines in good faith (after consultation with its financial advisors and its outside legal counsel) that the failure to take such actions would reasonably be expected to be inconsistent with the Board of Directors’ fiduciary duties to stockholders under applicable law, and Grace has delivered to Parent prior written notice that it intends to take such actions. For more information, please see the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—Company Takeover Proposals; No Solicitation.”
Prior to the adoption of the Merger Agreement by the Grace Stockholders, Grace is entitled to terminate the Merger Agreement for the purpose of entering into an agreement in respect of a Superior Company Proposal if it complies with certain procedures in the Merger Agreement, including, but not limited to, negotiating with Parent in good faith over a five (5) business day period in an effort to amend the terms and conditions of the Merger Agreement (three (3) business days in the case of subsequent revisions to the material terms of such Superior Company Proposal), and the Board of Directors determines in good faith (after consultation with its outside legal counsel and financial advisors) that the failure to terminate the Merger Agreement as a result of such Superior Company Proposal would be inconsistent with the Board of Directors’ fiduciary duties under applicable law.
The termination of the Merger Agreement by Grace following the Board of Directors’ authorization for Grace to enter into a definitive agreement to consummate an alternative transaction contemplated by a Superior Company Proposal will result in the payment by Grace of a termination fee of $141 million. For more information, please see the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—Company Board Recommendation; Company Adverse Recommendation Change.”
In addition to the circumstances described above, Parent and Grace have certain rights to terminate the Merger Agreement under customary circumstances, including:
by mutual agreement;
the imposition of any final and non-appealable law or judgment by a governmental entity of competent jurisdiction that permanently restrains, enjoins or otherwise prohibits the consummation of the Merger;
the other party breaches or fails to perform any of its covenants or agreements set forth in the Merger Agreement or any of the other party’s representations or warranties fails to be true and correct, which, in either case would give rise to a failure of the conditions to completion of the Merger relating to the accuracy of the other party’s representations and warranties or performance of the other party’s covenants and is not reasonably capable of being cured by the End Date (as defined below) or, if capable of being cured, is not cured within 30 calendar days following the delivery of written notice of such breach or failure;
if the Merger has not been consummated by 5:00 p.m., New York City time, on January 26, 2022 (the “End Date”) (subject to extension to April 26, 2022 under certain circumstances, including for purposes of obtaining required regulatory approvals (as further described in the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—Termination of the Merger Agreement”)); or
if Grace Stockholders fail to adopt the Merger Agreement at the Special Meeting (or any adjournment or postponement thereof).
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Under some circumstances, (i) Grace is required to pay Parent a termination fee equal to $141 million (the “Company Termination Fee”); and (ii) Parent is required to pay Grace a termination fee equal to $281 million (the “Parent Termination Fee”). Please see the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—Termination Fee.”
If the Merger Agreement is not adopted by Grace Stockholders, or if the Merger is not completed for any other reason:
the Grace Stockholders will not be entitled to, nor will they receive, any payment for their respective shares of Grace common stock pursuant to the Merger Agreement;
(i) Grace will remain an independent public company; (ii) Grace common stock will continue to be listed and traded on NYSE and registered under the Exchange Act; and (iii) Grace will continue to file periodic reports with the SEC; and
under certain specified circumstances, Grace will be required to pay Parent a Company Termination Fee of $141 million upon the termination of the Merger Agreement. For more information, please see the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—Termination Fee.”
The Supporting Stockholder, which beneficially owns 9,865,008 shares of Grace common stock representing approximately 14.9% of the outstanding Grace common stock as of May 13, 2021, entered into the Voting Agreement with the Company. Pursuant to the Voting Agreement, the Supporting Stockholder has agreed, among other things, to vote its shares of Grace common stock in favor of the proposal to adopt the Merger Agreement.
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The following questions and answers address some commonly asked questions regarding the Merger, the Merger Agreement and the Special Meeting. These questions and answers may not address all questions that are important to you. You should carefully read and consider the more detailed information contained elsewhere in this proxy statement and the annexes to this proxy statement, including, but not limited to, the Merger Agreement, along with all of the documents we refer to in this proxy statement, as they contain important information about, among other things, the Merger and how it affects you. You may obtain the information incorporated by reference in this proxy statement without charge by following the instructions under the caption, “Where You Can Find More Information.”
| Q: | Why am I receiving these materials? |
| A: | The Board of Directors is furnishing this proxy statement and form of proxy card to the holders of shares of Grace common stock in connection with the solicitation of proxies to be voted at the Special Meeting. |
| Q: | When and where is the Special Meeting? |
| A: | Grace will hold the Special Meeting at [ ], on [ ], 2021, at [ ], Eastern time. |
| Q: | What am I being asked to vote on at the Special Meeting? |
| A: | You are being asked to vote on the following proposals: |
to adopt the Merger Agreement pursuant to which Merger Sub will merge with and into Grace, and Grace will become a wholly owned subsidiary of Parent;
to approve, on an advisory (non-binding) basis, the Compensation Proposal; and
to approve the Adjournment Proposal.
| Q: | Who is entitled to vote at the Special Meeting? |
| A: | Only holders of record of Grace common stock as of the close of business on [ ], 2021, the Record Date for the Special Meeting, are entitled to notice of the Special Meeting and to vote at the Special Meeting. Each holder of Grace common stock will be entitled to cast one (1) vote on each matter properly brought before the Special Meeting for each such share owned at the close of business on the Record Date. |
| Q: | How do I attend the Special Meeting? |
| A: | If you are a stockholder of record as of the Record Date, you may attend the Special Meeting in person. If you plan to attend the Special Meeting in person, you must provide proof of ownership of Grace common stock as of the Record Date, such as an account statement indicating ownership on that date and a form of personal identification for admission to the meeting. |
Even if you plan to attend the Special Meeting in person, to ensure that your shares will be represented at the Special Meeting, we encourage you to authorizesign, date and return the enclosed proxy card in the accompanying prepaid reply envelope or grant your proxy electronically over the Internet or by telephone (using the instructions provided in the enclosed proxy card). If you attend the Special Meeting and vote in person, your vote will revoke any proxy previously submitted.
If you hold your shares in “street name,” you should instruct your bank, broker or other nominee how to vote your shares in accordance with the voting instruction form that you will receive from your bank, broker or other nominee. Your broker or other agent cannot vote on any of the proposals, including the proposal to adopt the Merger Agreement, without your instructions. If you hold your shares in “street name,” you may not vote your shares in person at the Special Meeting unless you obtain a “legal proxy” from your bank, broker or other nominee.
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| Q: | How many shares are needed to constitute a quorum? |
| A: | A quorum will be present if holders of a majority of the shares of Grace common stock issued and outstanding and entitled to vote at the Special Meeting are present in person or represented by proxy at the Special Meeting. If a quorum is not present at the Special Meeting, the Special Meeting may be adjourned or postponed from time to time until a quorum is obtained. |
As of the Record Date, there were [ ] shares of Grace common stock outstanding and entitled to vote at the Special Meeting.
If you submit a proxy but fail to provide voting instructions or abstain on any of the proposals listed on the proxy card, your shares will be counted for the purpose of determining whether a quorum is present at the Special Meeting.
If your shares are held in “street name” by your broker, bank or other nominee and you do not instruct the nominee how to vote your shares, your broker, bank or other nominee will not vote on your behalf with respect to any of the proposals, and your shares will not be counted for purposes of determining whether a quorum is present for the transaction of business at the Special Meeting.
| Q: | What will I receive if the Merger is completed? |
| A: | Upon completion of the Merger, you will be entitled to receive the Merger Consideration of $70.00 in cash, without interest and less any applicable withholding taxes, for each share of Grace common stock that you own, unless you have properly exercised and not withdrawn your appraisal rights under the DGCL. For example, if you own 100 shares of Grace common stock, you will receive $7,000 in cash in exchange for your shares of Grace common stock, without interest and less any applicable withholding taxes. |
Additionally, the Merger Agreement provides that each Company Option and Company SAR outstanding immediately prior to the Effective Time, whether vested or unvested, will be cancelled at the Effective Time and be converted into the right to receive a cash payment (without interest and less applicable withholding taxes) equal to the product of (i) the excess of the Merger Consideration over the per share exercise price of such Company Option or Company SAR, and (ii) the number of shares of Grace common stock covered by such Company Option or Company SAR immediately prior to the Effective Time. Any Company Option or Company SAR that has a per share exercise price that is greater than or equal to the Merger Consideration will be cancelled for no consideration or payment.
Each Company RSU Award and each Company Performance Share Award that is outstanding immediately prior to the Effective Time will be assumed at the Effective Time and converted into the right to receive an amount in cash (without interest) equal to the product of (i) the Merger Consideration and (ii) the number of shares of Grace common stock covered by the applicable award immediately prior to the Effective Time, which converted cash award will be subject to continued service vesting and other terms as promptlyset forth in the Merger Agreement, as possible by internet, by phone,described in greater detail in the section of this proxy statement captioned “The Merger—Interests of Executive Officers and Directors of Grace in the Merger—Treatment of Company Equity Awards.”
| Q: | What vote is required to adopt the Merger Agreement? |
| A: | The affirmative vote of the holders of a majority of the outstanding shares of Grace common stock entitled to vote at the Special Meeting is required to adopt the Merger Agreement. |
If a quorum is present at the Special Meeting, the failure of any stockholder of record to: (i) submit a signed proxy card; (ii) grant a proxy over the Internet or by mail.telephone (using the instructions provided in the enclosed proxy card); or (iii) vote in person at the Special Meeting will have the same effect as a vote “AGAINST” the proposal to adopt the Merger Agreement. If you hold your shares in “street name” and a quorum is present at the Special Meeting, the failure to instruct your bank, broker or other nominee how to vote your shares will have the same effect as a vote “AGAINST” the proposal to adopt the Merger Agreement. If a quorum is present at the Special Meeting, abstentions will have the same effect as a vote “AGAINST” the proposal to adopt the Merger Agreement. Each “broker non-vote” will also count as a vote “AGAINST” the proposal to adopt the Merger Agreement but will have no effect on the Compensation Proposal or the Adjournment Proposal. If you properly sign your proxy card but do not mark the boxes showing how your
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shares should be voted on a matter, the shares represented by your properly signed proxy will be voted: (1) “FOR” the proposal to adopt the Merger Agreement; (2) “FOR,” on an advisory (non-binding) basis, the Compensation Proposal; and (3) “FOR” the Adjournment Proposal.
| Q: | Have any Grace Stockholders already agreed to approve the proposal to adopt the Merger Agreement? |
| A: | Yes. 40 North Latitude Master Fund Ltd., the Supporting Stockholder, which beneficially owns 9,865,008 shares of Grace common stock representing approximately 14.9% of the outstanding Grace common stock as of May 13, 2021, has entered into the Voting Agreement with the Company. Pursuant to the Voting Agreement, the Supporting Stockholder has agreed, among other things, to vote its shares of Grace common stock in favor of the proposal to adopt the Merger Agreement. For more information, see the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—The Voting Agreement.” |
| Q: | What happens if the Merger is not completed? |
| A: | If the Merger Agreement is not adopted by Grace Stockholders or if the Merger is not completed for any other reason, Grace Stockholders will not receive any payment for their shares of Grace common stock. Instead, Grace will remain an independent public company, Grace common stock will continue to be listed and traded on the NYSE and registered under the Exchange Act, and we will continue to file periodic reports with the SEC. |
In the event that either Grace or Parent terminates the Merger Agreement, then, under specified circumstances, Grace will be required to pay Parent a termination fee of $141 million or Parent will be required to pay Grace the Parent Termination Fee of $281 million, as described in the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—Termination Fee.”
| Q: | Why are the stockholders being asked to cast an advisory (non-binding) vote to approve the Compensation Proposal? |
| A: | The Exchange Act and applicable SEC rules thereunder require Grace to seek an advisory (non-binding) vote with respect to certain payments that could become payable to its named executive officers in connection with the Merger. |
| Q: | What vote is required to approve the Compensation Proposal? |
| A: | The affirmative vote of the holders of a majority of the shares present in person or represented by proxy at the Special Meeting and entitled to vote on the subject matter is required for approval of the Compensation Proposal. An abstention with respect to the Compensation Proposal will have the same effect as a vote “AGAINST” this proposal. A failure to return your proxy card or otherwise vote your shares of Grace common stock (including a failure of your broker, bank or other nominee to vote shares held on your behalf) will have no effect on this proposal, assuming a quorum is present. |
| Q: | What will happen if the stockholders do not approve the Compensation Proposal at the Special Meeting? |
| A: | Approval of the Compensation Proposal is not a condition to the completion of the Merger. The vote with respect to the Compensation Proposal is an advisory vote and will not be binding on Grace. Therefore, if the other requisite stockholder approvals are obtained and the Merger is completed, the amounts payable under the Compensation Proposal will continue to be payable to Grace’s named executive officers in accordance with the terms and conditions of the applicable agreements. |
| Q: | What vote is required to approve the Adjournment Proposal? |
| A: | The affirmative vote of the holders of a majority of the shares present in person or represented by proxy at the Special Meeting and entitled to vote on the subject matter is required for approval of the Adjournment Proposal. An abstention with respect to the Adjournment Proposal will have the same |
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effect as a vote “AGAINST” the proposal. A failure to return your proxy card or otherwise vote your shares of Grace common stock (including a failure of your broker, bank or other nominee to vote shares held on your behalf), will have no effect on this proposal, assuming a quorum is present.
| Q: | How does the Board of Directors recommend that I vote? |
| A: | The Board of Directors unanimously recommends that Grace Stockholders vote: |
“FOR” the proposal to adopt the Merger Agreement;
“FOR” the proposal to approve, on an advisory (non-binding) basis, the Compensation Proposal; and
“FOR” the Adjournment Proposal.
For a discussion of the factors that the Board of Directors considered in determining to recommend in favor of the proposal to adopt the Merger Agreement, see the section of this proxy statement captioned “The Merger—Recommendation of the Board of Directors; Reasons for the Merger.” In addition, in considering the recommendation of the Board of Directors with respect to the Merger Agreement, you should be aware that some of our directors and executive officers have interests that may be different from, or in addition to, the interests of Grace Stockholders generally. For a discussion of these interests, see the section of this proxy statement captioned “The Merger—Interests of Executive Officers and Directors of Grace in the Merger.”
| Q: | How do the Grace directors and executive officers intend to vote? |
| A: |
| Q: | Am I entitled to rights of appraisal under the DGCL? |
| A: | If the Merger is completed, stockholders who do not vote in favor of the adoption of the Merger Agreement and who properly demand appraisal of their shares will be entitled to appraisal rights in connection with the Merger under Section 262 of the DGCL. This means that holders of shares of Grace common stock are entitled to have their shares appraised by the Delaware Court of Chancery and to receive payment in cash of the “fair value” of their shares of Grace common stock, exclusive of any elements of value arising from the accomplishment or expectation of the Merger, together with interest on the amount determined to be fair value, if any, as determined by the court. Grace Stockholders who wish to seek appraisal of their shares are in any case encouraged to seek the advice of legal counsel with respect to the exercise of appraisal rights due to the complexity of the appraisal process. The DGCL requirements for exercising appraisal rights are described in additional detail in this proxy statement, and the relevant section of the DGCL regarding appraisal rights is reproduced in Annex D to this proxy statement. See the section of this proxy statement captioned “The Merger—Appraisal Rights.” |
| Q: | What do I need to do now? |
| A: | You should carefully read and consider this entire proxy statement and the annexes to this proxy statement, including, but not limited to, the Merger Agreement, along with all of the documents that we refer to in this proxy statement, as they contain important information about, among other things, the Merger and how it affects you. Then sign, date and return, as promptly as possible, the enclosed proxy card in the accompanying reply envelope, or grant your proxy electronically over the Internet or by telephone (using the instructions provided in the enclosed proxy card), so that your shares can be voted at the Special Meeting, unless you wish to seek appraisal. If you hold your shares in “street name,” please refer to the voting instruction forms provided by your bank, broker or other nominee to vote your shares. |
| Q: | Should I send in my stock certificates or other evidence of ownership now? |
| A: | No. You should not return your stock certificates or send in other documents evidencing ownership of Grace common stock with the proxy card. If the Merger is completed, if your shares |
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of Grace common stock are evidenced by stock certificates, the paying agent for the Merger will send you a letter of transmittal and written instructions that explain how to exchange shares of Grace common stock for the Merger Consideration (without interest and subject to required withholding taxes).
| Q: | What happens if I sell or otherwise transfer my shares of Grace common stock after the Record Date but before the Special Meeting? |
| A: | The Record Date for the Special Meeting is earlier than the date of the Special Meeting and the date the Merger is expected to be completed. If you sell or transfer your shares of Grace common stock after the Record Date but before the Special Meeting, unless special arrangements (such as provision of a proxy) are made between you and the person to whom you sell or otherwise transfer your shares and each of you notifies Grace in writing of such special arrangements, you will transfer the right to receive the Merger Consideration, if the Merger is completed, to the person to whom you sell or transfer your shares, but you will retain your right to vote those shares at the Special Meeting. Even if you sell or otherwise transfer your shares of Grace common stock after the Record Date, we encourage you to sign, date and return the enclosed proxy card in the accompanying reply envelope or grant your proxy electronically over the Internet or by telephone (using the instructions provided in the enclosed proxy card). |
| Q: | What is the difference between holding shares as a stockholder of record and as a beneficial owner? |
| A: | If your shares are registered directly in your name with our transfer agent, EQ Shareowner Services, you are considered, with respect to those shares, to be the “stockholder of record.” In this case, this proxy statement and your proxy card have been sent directly to you by Grace. |
If your shares are held through a bank, broker or other nominee, you are considered the “beneficial owner” of shares of Grace common stock held in “street name.” In that case, this proxy statement has been forwarded to you by your bank, broker or other nominee who is considered, with respect to those shares, to be the stockholder of record. As the beneficial owner, you have the right to direct your bank, broker or other nominee how to vote your shares by following their instructions for voting. You are also invited to attend the Special Meeting. However, because you are not the stockholder of record, you may not vote your shares in person at the Special Meeting unless you obtain a “legal proxy” from your bank, broker or other nominee.
| Q: | How may I vote? |
A: If you are a stockholder of record (that is, if your shares of Grace common stock are registered in your name with EQ Shareowner Services, our transfer agent), there are four (4) ways to vote:
by signing, dating and returning the enclosed proxy card in the accompanying prepaid reply envelope;
by visiting the Internet at the address on your proxy card;
by calling toll-free (within the U.S. (including its territories) and Canada) at the phone number on your proxy card; or
by attending the Special Meeting in person.
Please be aware that, although there is no charge for voting your shares, if you vote electronically over the Internet by visiting the address on your proxy card or by telephone by calling the phone number on your proxy card, in each case, you may incur costs such as Internet access and telephone charges for which you will be responsible.
Even if you plan to attend the Special Meeting in person, you are strongly encouraged to vote your shares of Grace common stock by proxy. If you are a record holder or if you obtain a “legal proxy” to vote shares that you beneficially own, you may still vote your shares of Grace common stock in person at the Special Meeting even if you have previously voted by proxy. If you are present at the Special Meeting and vote in person, your previous vote by proxy will not be counted.
If your shares are held in “street name” through a bank, broker or other nominee, you may vote through your bank, broker or other nominee by completing and returning the voting form provided by your bank, broker
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or other nominee, or, if such a service is provided by your bank, broker or other nominee, electronically over the Internet or by telephone. To vote over the Internet or by telephone through your bank, broker or other nominee, you should follow the instructions on the voting form provided by your bank, broker or nominee.
| Q: | If my broker holds my shares in “street name,” will my broker vote my shares for me? |
| A: | No. Your bank, broker or other nominee is permitted to vote your shares on any proposal currently scheduled to be considered at the Special Meeting only if you instruct your bank, broker or other nominee how to vote. You should follow the procedures provided by your bank, broker or other nominee to vote your shares. Without instructions, your shares will not be voted on such proposals, which will have the same effect as if you voted “AGAINST” the proposal to adopt the Merger Agreement but will have no effect on the Compensation Proposal or the Adjournment Proposal. |
| Q: | May I change my vote after I have mailed my signed and dated proxy card? |
| A: | Yes. If you are a stockholder of record, you may change your vote or revoke your proxy at any time before it is voted at the Special Meeting by: |
signing another proxy card with a later date and returning it to us prior to the Special Meeting;
submitting a new proxy electronically over the Internet or by telephone after the date of the earlier submitted proxy;
delivering a written notice of revocation to the Corporate Secretary of Grace; or
by attending the Special Meeting and voting in person.
Please note that if you want to revoke your proxy by mailing a new proxy card to us or by sending a written notice of revocation to us, you should ensure that you send your new proxy card or written notice of revocation in sufficient time for it to be received by us before the Special Meeting.
If you hold your shares of Grace common stock in “street name,” you should contact your bank, broker or other nominee for instructions regarding how to change your vote. You may also vote in person at the Special Meeting if you obtain a “legal proxy” from your bank, broker or other nominee.
| Q: | What is a proxy? |
| A: | A proxy is your legal designation of another person to vote your shares of Grace common stock. The written document describing the matters to be considered and voted on at the Special Meeting is called a “proxy statement.” The document used to designate a proxy to vote your shares of Grace common stock is called a “proxy card.” |
| Q: | If a stockholder gives a proxy, how are the shares voted? |
| A: | Regardless of the method you choose to vote, the individuals named on the enclosed proxy card, or your proxies, will vote your shares in the way that you indicate. When completing the Internet or telephone process or the proxy card, you may specify whether your shares should be voted for or against or to abstain from voting on all, some or none of the specific items of business to come before the Special Meeting. |
If you properly sign your proxy card but do not mark the boxes showing how your shares should be voted on a matter, the shares represented by your properly signed proxy will be voted: (1) “FOR” the proposal to adopt the Merger Agreement; (2) “FOR,” on an advisory (non-binding) basis, the Compensation Proposal; and (3) “FOR” the Adjournment Proposal.
| Q: | What should I do if I receive more than one (1) set of voting materials? |
| A: | Please sign, date and return (or grant your proxy electronically over the Internet or by telephone using the instructions provided in the enclosed proxy card) each proxy card and voting instruction card that you receive. |
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You may receive more than one (1) set of voting materials, including multiple copies of this proxy statement and multiple proxy cards or voting instruction cards. For example, if you hold your shares in more than one (1) brokerage account, you will receive a separate voting instruction card for each brokerage account in which you hold shares. If you are a stockholder of record and your shares are registered in more than one (1) name, you will receive more than one (1) proxy card.
| Q: | What is householding and how does it affect me? |
| A: | The SEC permits companies to send a single set of proxy materials to any household at which two or more stockholders reside, unless contrary instructions have been received, but only if the company provides advance notice and follows certain procedures. In such cases, each stockholder continues to receive a separate notice of the meeting and proxy card. Certain brokerage firms may have instituted householding for beneficial owners of common stock held through brokerage firms. If your family has multiple accounts holding common stock, you may have already received a householding notification from your broker. Please contact your broker directly if you have any questions or require additional copies of this proxy statement. The broker will arrange for delivery of a separate copy of this proxy statement promptly upon your written or oral request. You may decide at any time to revoke your decision to household, and thereby receive multiple copies. |
| Q: | Who will solicit and pay the costs of soliciting proxies? |
| A: | The Board of Directors is soliciting your proxy, and Grace will bear the costs of this solicitation. MacKenzie Partners, Inc. (“MacKenzie Partners”) has been retained to assist with the solicitation of proxies. MacKenzie Partners will be paid $[ ] and will be reimbursed for its reasonable out-of-pocket expenses for these and other advisory services in connection with the Special Meeting. We will reimburse brokerage firms and others for their reasonable expenses of forwarding solicitation material to beneficial owners of outstanding Grace common stock. Proxies may be solicited by mail, personal interview, e-mail, telephone or via the Internet or, without additional compensation, by certain of Grace’s directors, officers and employees. |
| Q: | Where can I find the voting results of the Special Meeting? |
| A: | Grace intends to publish final voting results in a Current Report on Form 8-K to be filed with the SEC following the Special Meeting. All reports that Grace files with the SEC are publicly available when filed. For more information, please see the section of this proxy statement captioned “Where You Can Find More Information.” |
| Q: | When do you expect the Merger to be completed? |
| A: | We are working toward completing the Merger as quickly as possible and currently expect to complete the Merger in the fourth quarter of 2021. However, the exact timing of completion of the Merger cannot be predicted because the Merger is subject to the closing conditions specified in the Merger Agreement, many of which are outside of our control. |
| Q: | Will the Merger be a taxable transaction? |
| A: | The Merger will be a taxable transaction for U.S. federal income tax purposes. Grace Stockholders should read the section of this proxy statement captioned “The Merger—Material U.S. Federal Income Tax Consequences of the Merger” for a more detailed explanation of the U.S. federal income tax consequences of the Merger. Grace Stockholders should consult their tax advisors in light of their particular circumstances and any consequences arising under U.S. federal, state, local and non-U.S. income and other tax consequences relating to the Merger. |
| Q: | Who can help answer my questions? |
| A: | If you have any questions concerning the Merger, the Special Meeting or the accompanying proxy statement, would like additional copies of the accompanying proxy statement or need help voting your shares of Grace common stock, please contact our proxy solicitor: |
MacKenzie Partners, Inc.
Collect: (212) 929-5550
Toll-Free: (800) 322-2885
E-mail : proxy@mackenziepartners.com
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risks related to foreign operations, especially in areas of active conflicts and in emerging regions;
the costs and availability of raw materials, energy, and transportation;
the effectiveness of Grace’s research and development and growth investments;
acquisitions and divestitures of assets and businesses;
developments affecting Grace’s outstanding indebtedness;
developments affecting Grace’s pension obligations;
legacy matters (including product, environmental, and other legacy liabilities) relating to past activities of Grace;
its legal and environmental proceedings;
environmental compliance costs (including existing and potential laws and regulations pertaining to climate change);
the inability to establish or maintain certain business relationships;
the inability to hire or retain key personnel;
natural disasters such as storms and floods;
fires and force majeure events;
the economics of our customers’ industries, including the petroleum refining, petrochemicals, and plastics industries, and shifting consumer preferences;
public health and safety concerns, including pandemics and quarantines;
changes in tax laws and regulations;
international trade disputes, tariffs, and sanctions;
the potential effects of cyberattacks;
the occurrence of any event, change or other circumstance that could give rise to the termination of the Merger Agreement;
the failure to obtain Grace stockholder approval of the transaction or the "Company" mean W. R.failure to satisfy any of the other conditions to the completion of the Merger;
risks relating to the financing required to complete the Merger;
the effect of the announcement of the Merger on the ability of Grace & Co. and/to retain and hire key personnel and maintain relationships with its customers, vendors and others with whom it does business, or on its consolidated subsidiaries. Unless otherwise indicated, operating results and businesses generally;
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the contentseffects of websites mentioned in this Proxy Statement are not incorporated by reference or otherwise made a partthe transaction on the previously announced Fine Chemistry Services business acquisition, which is pending as of the date of this Proxy Statement. Grace®,filing, and the Grace® logointegration thereof;
risks associated with the disruption of management’s attention from ongoing business operations due to the transaction;
the ability to meet expectations regarding the timing and except as may otherwise be indicated, the other trademarks, service marks or trade names used in this Proxy Statement are trademarks, service marks or trade names of operating units of W. R. Grace & Co. or its subsidiaries. See Annex A to this Proxy Statement for a descriptioncompletion of the "Separation."Merger;
significant transaction costs, fees, expenses and charges;
other business effects, including the effects of industry, market, economic, political, regulatory or world health conditions (including new or ongoing effects of the COVID-19 pandemic), and other factors detailed in accordance with U.S. Generally Accepted Accounting Principles, or "GAAP," as well as financial information that is not in accordance with GAAP, referred to herein as "non-GAAP" financial measures. See Annex A to this Proxy Statement for important information concerning such non-GAAP financial measures, which includes cross-references to Grace's 2018 Annual Report on Form 10-K. TheGrace’s Annual Report on Form 10-K includes financialfiled with the SEC for the fiscal year ended December 31, 2020 and Grace’s other filings with the SEC, which are available at www.sec.gov and on Grace’s website at www.grace.com.
Our reported results should not be considered as an indication of our future performance. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. Grace undertakes no obligation to release publicly any revisions to our projections and information presented in accordance with GAAP, as well as certain non-GAAP information. Non-GAAP performance measures used in this Proxy Statement include: Adjusted EBIT; Adjusted Free Cash Flow; Adjusted Net Sales;forward-looking statements, or to update them to reflect events or circumstances occurring after the dates those projections and Adjusted Earnings Per Share (referred to as "Adjusted EPS").statements are made.
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The enclosed proxy is solicited on behalf of the Board of Directors for use at the Special Meeting.
The Special Meeting will be held at [ ], on [ ], 2021, at [ ], Eastern time.
At the Special Meeting, we will ask stockholders to vote on proposals to:
approve the adoption of the Merger Agreement, which is further described in the sections of this proxy statement captioned “The Merger” and “Proposal 1: Adoption of the Merger Agreement”;
approve, on an advisory (non-binding) basis, certain compensation that may be paid or become payable to Grace’s named executive officers that is based on or otherwise related to the Merger Agreement and the transactions contemplated by the Merger Agreement, the value of which is disclosed in the table in the section of this proxy statement captioned “The Merger—Interests of Executive Officers and Directors of Grace & Co.in the Merger”; and
adjourn the Special Meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to adopt the Merger Agreement at the time of the Special Meeting.
Our stockholders must adopt the Merger Agreement for the Merger to occur. If our stockholders fail to adopt the Merger Agreement, the Merger will not occur. A copy of the Merger Agreement is hereby solicitingattached to this proxy statement as Annex A, and certain provisions of the Merger Agreement are described in the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement.”
The vote on the named executive officer Merger-related compensation proposal is a vote separate and apart from the vote on the proposal to adopt the Merger Agreement. Accordingly, you may vote to adopt the Merger Agreement and vote not to approve the named executive officer Merger-related compensation proposal and vice versa. Because the vote on the named executive officer Merger-related compensation proposal is advisory only, it will not be binding on either Grace or Parent. Accordingly, if the Merger Agreement is adopted and the Merger is completed, the compensation will be payable, subject only to the conditions applicable thereto under the applicable compensation agreements and arrangements, regardless of the outcome of the non-binding, advisory vote of the Grace Stockholders.
We do not expect that any matters other than the proposals set forth above will be brought before the Special Meeting. If, however, such a matter is properly presented at the Special Meeting or any adjournment or postponement thereof, the persons appointed as proxies will have discretionary authority to vote the shares represented by duly executed proxies.
This proxy statement and the enclosed form of proxy are first being mailed to our stockholders on or about [ ].
Only stockholders of record as of the close of business on [ ], the Record Date for the Special Meeting, are entitled to notice of the Special Meeting and to vote at the Special Meeting. As of the Record Date, there were [ ] shares of Grace common stock outstanding and entitled to vote at the Special Meeting.
The holders of a majority of the Grace common stock issued and outstanding and entitled to vote in person or as represented by proxy will constitute a quorum at the Special Meeting. In the event that a quorum is not present at the Special Meeting, it is expected that the meeting will be adjourned to solicit additional proxies. Once a share is represented at the Special Meeting, it will be counted for purposes of determining whether a quorum is present at the Special Meeting. However, if a new record date is set for an adjourned Special Meeting, a new quorum will have to be established. Proxies received but marked as abstentions will be included in the calculation of the number of shares considered to be present at the Special Meeting.
The affirmative vote of the holders of a majority of the outstanding shares of Grace common stock entitled to vote at the Special Meeting is required to adopt the Merger Agreement. As of the Record Date, [ ]
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votes constitute a majority of the outstanding shares of Grace common stock entitled to vote at the Special Meeting. The adoption of the Merger Agreement by stockholders is a condition to the closing of the Merger.
Approval of each of (i) the Adjournment Proposal, whether or not a quorum is present, and (ii) the Compensation Proposal requires the affirmative vote of a majority of the shares present in person or represented by proxy at the Special Meeting and entitled to vote on the subject matter.
An abstention occurs when a stockholder attends a meeting, in person or by proxy, but abstains from voting. At the Special Meeting, abstentions will be counted in determining whether a quorum is present. If a stockholder abstains from voting or fails to vote its shares of Grace common stock (including the failure of a record owner to execute and return a proxy card and the failure of a beneficial owner of shares held in “street name” by a broker to give voting instructions to the broker), that abstention or failure to vote will have the same effect as if the stockholder voted “AGAINST” the proposal to adopt the Merger Agreement. For stockholders who attend the meeting or are represented by proxy and abstain from voting, the abstention will have the same effect as if the stockholder voted “AGAINST” the Compensation Proposal and “AGAINST” the Adjournment Proposal. However, a failure to return your proxy card or otherwise vote your shares of Grace common stock will have no effect on the Compensation Proposal and the Adjournment Proposal, assuming a quorum is present.
Each “broker non-vote” will also count as a vote “AGAINST” the proposal to adopt the Merger Agreement but will have no effect on the Compensation Proposal or the Adjournment Proposal. Broker non-votes are shares held by brokers that are present in person or by proxy at the Special Meeting, but with respect to which the broker is not instructed by the beneficial owner of such shares how to vote on a particular proposal and the broker does not have discretionary voting power on such proposal. Because brokers do not have discretionary voting authority with respect to any of the three proposals described in this proxy statement, if a beneficial owner of shares of Grace common stock held in “street name” does not give voting instructions to the broker, then those shares will not be present in person or by proxy at the Special Meeting. For shares of Grace common stock held in “street name,” only shares of Grace common stock affirmatively voted “FOR” the proposal to adopt the Merger Agreement will be counted as a vote in favor of such proposal.
Shares Held by Grace’s Directors and Executive Officers
As of the Record Date, our 2019 Annual Meetingdirectors and executive officers beneficially owned and were entitled to vote, in the aggregate, [ ] shares of Shareholders (the "Annual Meeting")Grace common stock, representing approximately [ ]% of the shares of Grace common stock outstanding on the Record Date (and approximately [ ]% of the total shares of Grace common stock outstanding when taking into account Company Options held, in the aggregate, by our directors and executive officers).
We are providing thesecurrently expect that our directors and executive officers will vote all of their respective shares of Grace common stock (1) “FOR” the adoption of the Merger Agreement, (2) “FOR,” on an advisory (non-binding) basis, the Compensation Proposal, and (3) “FOR” the Adjournment Proposal.
Shares Held by 40 North Latitude Master Fund Ltd.
The Supporting Stockholder, which beneficially owns 9,865,008 shares of Grace common stock representing approximately 14.9% of the outstanding Grace common stock as of May 13, 2021, has entered into the Voting Agreement with the Company. Pursuant to the Voting Agreement, the Supporting Stockholder has agreed, among other things, to vote its shares of Grace common stock in favor of the proposal to adopt the Merger Agreement. For more information, see the section of this proxy materials to you because our records indicate that you ownedstatement captioned “Proposal 1: Adoption of the Merger Agreement—The Voting Agreement.”
Attendance
All holders of shares of Grace common stock as of the close of business on March 12, 2019,[ ], the Record Date, including stockholders of record and beneficial owners of Grace common stock registered in the “street name” of a broker, bank or other nominee, are invited to attend the Special Meeting.
To attend the Special Meeting in person, you must provide proof of ownership of Grace common stock as of the Record Date, such as an account statement indicating ownership on that date, and a form of personal
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identification for our 2019 Annual Meeting of Shareholdersadmission to the Special Meeting. If you hold your shares in “street name,” and you also wish to be held on Wednesday, May 8, 2019, at 8:30 a.m. Eastern Time at the Ten Oaks Ballroom and Conference Center, 5000 Signal Bell Lane, Clarksville, Maryland 21029. Such ownership entitles youable to vote at the AnnualSpecial Meeting, you must obtain a “legal proxy”, executed in your favor, from your bank, broker or other nominee.
Shares of Grace Common Stock Held by Record Holders
If your shares are registered in your name with our transfer agent, EQ Shareowner Services, you may cause your shares to be voted by returning a signed and dated proxy card in the accompanying prepaid envelope, or you may vote in person at the Special Meeting. By use ofAdditionally, you may grant a proxy electronically over the Internet or by telephone (using the instructions provided in the enclosed proxy card). You must have the enclosed proxy card available and follow the instructions on the proxy card in order to grant a proxy electronically over the Internet or by telephone. Based on your proxy cards or Internet and telephone proxies, the proxy holders will vote your shares according to your directions.
If you canplan to attend the Special Meeting and wish to vote whether or notin person, you will be given a ballot at the Special Meeting. If your shares are registered in your name, you are encouraged to vote by proxy even if you plan to attend the Special Meeting in person. If you attend the Annual Meeting.
Voting instructions are included on your proxy card. All shares represented by properly signed and dated proxies received in time for the Special Meeting will be voted at the Special Meeting in accordance with the instructions of the stockholder. Properly signed and dated proxies that do not contain voting instructions will be voted: (1) “FOR” adoption of the Merger Agreement; (2) “FOR,” on an advisory (non-binding) basis, the Compensation Proposal; and (3) “FOR” the Adjournment Proposal. If you fail to return your proxy card or vote by telephone or via the Internet, and you are a holder of record on the Record Date, unless you attend the Special Meeting and vote in person, your shares of Grace common stock will not be considered present at the Special Meeting for purposes of determining whether a quorum is present at the Special Meeting, which will have the same effect as a vote “AGAINST” the proposal to adopt the Merger Agreement and, assuming a quorum is present, will have no effect on the Compensation Proposal or the Adjournment Proposal.
Shares of Grace Common Stock Held in “Street Name”
If your shares are held in “street name” through a bank, broker or other nominee, you may vote through your bank, broker or other nominee by completing and returning the voting process, see "General Information"form provided by your bank, broker or other nominee or attending the Special Meeting and voting in this Proxy Statement. The mailing address ofperson with a “legal proxy” from your bank, broker or other nominee. If such a service is provided, you may vote over the principal executive offices of W. R. Grace & Co. is 7500 Grace Drive, Columbia, Maryland 21044. This Proxy Statement and proxy were first made availableInternet or telephone through your bank, broker or other nominee by following the instructions on the internetvoting form provided by your bank, broker or mailedother nominee. If you do not return your bank’s, broker’s or other nominee’s voting form, do not vote via the Internet or telephone through your bank, broker or other nominee, if possible, or do not attend the Special Meeting and vote in person with a “legal proxy” from your bank, broker or other nominee, it will have the same effect as if you voted “AGAINST” the proposal to shareholders on or about March 27, 2019.
If you are a shareholderstockholder of record, you may castchange your vote inor revoke your proxy at any time before it is voted at the Special Meeting by:
signing another proxy card with a later date and returning it to us prior to the Special Meeting;
submitting a new proxy electronically over the Internet or by telephone after the date of the following ways:earlier submitted proxy;
delivering a written notice of revocation to the Corporate Secretary of Grace; or
attending the Special Meeting and voting in person.
Please note that if you want to revoke your proxy by mailing a new proxy card to us or by sending a written notice of revocation to us, you should ensure that you send your new proxy card or written notice of revocation in sufficient time for it to be received by us before the Special Meeting.
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If you have submitted a proxy, byyour appearance at the internet at www.proxypush.com/gra (we encourageSpecial Meeting will not have the effect of revoking your prior proxy, provided that you do not vote in person or submit an additional proxy or revocation, which, in each case, will have the effect of revoking your proxy.
If you hold your shares of Grace common stock in “street name,” you should contact your bank, broker or other nominee for instructions regarding how to vote by the internet as it is the most cost-effective method and reduces the environmental impact of our Annual Meeting);
Any adjournment, postponement or intermediary that servesother delay of the Special Meeting, including for the purpose of soliciting additional proxies, will allow stockholders who have already sent in their proxies to revoke them at any time prior to their use at the Special Meeting as shareholderadjourned, postponed or delayed.
Board of record, you may cast your vote by complying with the instructions of your nominee or intermediary set forth on the voting instruction card.Directors’ Recommendation
The Board from nineof Directors unanimously recommends that you vote: (1) “FOR” the adoption of the Merger Agreement; (2) “FOR,” on an advisory (non-binding) basis, the Compensation Proposal; and (3) “FOR” the Adjournment Proposal.
The expense of soliciting proxies will be borne by Grace. We have retained MacKenzie Partners, a proxy solicitation firm, to eleven directors,solicit proxies in connection with the Special Meeting at a cost of approximately $[ ] plus expenses. We will also indemnify MacKenzie Partners against losses arising out of its provision of these services on our behalf. In addition, we may reimburse banks, brokers and we included Kathleen G. Reiland and Henry R. Slack on the slateother nominees representing beneficial owners of director nominees recommendedshares for their expenses in forwarding soliciting materials to such beneficial owners. Proxies may also be solicited by our Boarddirectors, officers and employees, personally or by telephone, e-mail, fax, over the Internet or other means of communication. No additional compensation will be paid for such services.
You should not return your stock certificates or send in this Proxy Statement and on our related proxy card. For the amountother documents evidencing ownership of Grace common stock beneficially owned, directlywith the proxy card. If the Merger is completed, if your shares of Grace common stock are evidenced by stock certificates, the paying agent for the Merger will send you a letter of transmittal and related materials and instructions for exchanging your shares of Grace common stock evidenced by stock certificates for the Merger Consideration (without interest and subject to required withholding taxes).
Assuming timely satisfaction of necessary closing conditions, including the approval by Grace Stockholders of the proposal to adopt the Merger Agreement, we anticipate that the Merger will be consummated in the fourth quarter of 2021.
If the Merger is consummated, stockholders who continuously hold shares of Grace common stock through the Effective Time, who do not vote in favor of the adoption of the Merger Agreement and who properly demand appraisal of their shares and do not withdraw their demands or indirectly,otherwise lose their rights to seek appraisal will be entitled to seek appraisal of their shares in connection with the Merger under Section 262 of the DGCL. This means that holders of shares of Grace common stock who perfect their appraisal rights, who do not thereafter withdraw their demand for appraisal, and who follow the procedures in the manner prescribed by Section 262 of the DGCL may be entitled to have their shares appraised by the 40 North Parties, see "Other Information—Stock OwnershipDelaware Court of Certain Beneficial OwnersChancery and Management," below.to receive payment in cash of the “fair value” of their shares of Grace common stock, exclusive of any elements of value arising from the accomplishment or expectation of the Merger, as determined by the Delaware Court of Chancery, together with interest to be paid on the amount determined to be fair value, if any (or in certain
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circumstances described in further detail in the section of this proxy statement captioned “The Merger—Appraisal Rights,” on the difference between the amount determined to be the fair value and the amount paid by the Surviving Corporation in the Merger to each stockholder entitled to appraisal prior to the Letter Agreement,entry of judgment in any appraisal proceeding). Due to the 40 North Parties agreedcomplexity of the appraisal process, stockholders who wish to certain standstill restrictions pursuantseek appraisal of their shares are encouraged to whichreview Section 262 of the 40 North Parties will refrain from taking certain actionsDGCL carefully and to seek the advice of legal counsel with respect to the Company andexercise of appraisal rights.
Stockholders considering seeking appraisal should be aware that the fair value of their shares as determined pursuant to Section 262 of the DGCL could be more than, the same as or less than the value of the consideration that they would receive pursuant to the Merger Agreement if they did not seek appraisal of their shares.
To exercise your appraisal rights, you must: (i) submit a written demand for appraisal to Grace before the vote is taken on the adoption of the Merger Agreement; (ii) not submit a proxy or otherwise vote in favor of the proposal to adopt the Merger Agreement; (iii) continue to hold your shares of Grace common stock of record through the Effective Time; and agreed(iv) strictly comply with all other procedures for exercising appraisal rights under Section 262 of the DGCL. Your failure to causefollow exactly the procedures specified under Section 262 of the DGCL may result in the loss of your appraisal rights. In addition, the Delaware Court of Chancery will dismiss appraisal proceedings in respect of the Merger unless certain stock ownership conditions are satisfied by the stockholders seeking appraisal. The DGCL requirements for exercising appraisal rights are described in further detail in the section of this proxy statement captioned “The Merger—Appraisal Rights,” which is qualified in its entirety by Section 262 of the DGCL, the relevant section of the DGCL regarding appraisal rights. A copy of Section 262 of the DGCL is reproduced and attached as Annex D to this proxy statement and incorporated herein by reference. If you hold your shares of Grace common stock through a bank, brokerage firm or other nominee and you wish to exercise appraisal rights, you should consult with your bank, brokerage firm or other nominee to determine the appropriate procedures for the making of a demand for appraisal by such bank, brokerage firm or nominee.
If the Merger is completed, the shares of Grace common stock over which they havewill be delisted from the right to voteNYSE and deregistered under the Exchange Act, and shares of Grace common stock will no longer be publicly traded.
At this time, we know of no other matters to be voted (i)on at the Special Meeting. If any other matters properly come before the Special Meeting, your shares of Grace common stock will be voted in favor of all nominees for director recommended by our Board, (ii) against any nominees for director not recommended by our Board and (iii) against any proposals to remove any director. The 40 North Parties may extendaccordance with the effectivenessdiscretion of the Letter Agreement into 2021. Concurrently withappointed proxy holders.
Unless we have received contrary instructions, we may send a single copy of this proxy statement to any household at which two (2) or more stockholders reside if we believe the executionstockholders are members of the Letter Agreement,same family. Each stockholder in the Companyhousehold will continue to receive a separate proxy card. This process, known as “householding,” reduces the volume of duplicate information received at your household and helps to reduce our expenses.
If you would like to receive your own set of our disclosure documents, please contact us using the 40 North Parties entered into an agreement (the “Confidentiality Agreement”) pursuant to which the 40 North Parties agreed to keep confidential certain information pursuant to the terms and conditionsinstructions set forth therein. The foregoing descriptionsbelow. Similarly, if you share an address with another stockholder and together both of you would like to receive only a single set of our disclosure documents, please contact us using the instructions set forth below.
If you are a stockholder of record, you may contact us by calling or writing to Grace Shareholder Services at the address or phone number provided below. Eligible stockholders of record receiving multiple copies of this proxy statement can request householding by contacting us in the same manner. If a bank, broker or other nominee holds your shares, please contact your bank, broker or other nominee directly.
W. R. Grace & Co.
Attention: Grace Shareholder Services
7500 Grace Drive
Columbia, Maryland 21044
(410) 531-4167
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If you have any questions concerning the Merger, the Special Meeting or this proxy statement, would like additional copies of this proxy statement or need help voting your shares of Grace common stock, please contact our proxy solicitor:
MacKenzie Partners, Inc.
Collect: (212) 929-5550
Toll-Free: (800) 322-2885
E-mail : proxy@mackenziepartners.com
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This discussion of the Letter Agreement and the Confidentiality Agreement do not purport to be complete and areMerger is qualified in theirits entirety by reference to the full textMerger Agreement, which is attached to this proxy statement as Annex A and incorporated into this proxy statement by reference. You should carefully read and consider the entire Merger Agreement, which is the legal document that governs the Merger, because this document contains important information about the Merger and how it affects you.
W. R. Grace & Co.
7500 Grace Drive
Columbia, Maryland 21044
(410) 531-4000
Grace, a Delaware corporation, is a leading global specialty chemical company. Grace’s two industry-leading business segments—Catalysts Technologies and Materials Technologies—provide innovative products, technologies, and services that enhance the products and processes of our customers around the world. With approximately 4,000 employees, Grace operates and/or sells to customers in over 60 countries. More information about Grace is available at www.grace.com. Grace common stock is listed on the New York Stock Exchange (“NYSE”) under the symbol “GRA.”
A detailed description of the Letter Agreement, which we filed withCompany’s business is contained in the SEC on February 28, 2019, as Exhibit 10.22 to ourCompany’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018.2020, as amended, which is incorporated by reference into this proxy statement. See the section of this proxy statement captioned “Where You Can Find More Information.”
Gibraltar Acquisition Holdings LLC
9 West 57th Street, 47th Floor
New York, New York 10019
(973) 872-4423
Parent was formed on April 22, 2021, solely for the purpose of engaging in the transactions contemplated by the Merger Agreement, and has not engaged in any business activities other than in connection with the transactions contemplated by the Merger Agreement and arranging of the equity financing and debt financing in connection with the Merger.
Gibraltar Merger Sub Inc.
9 West 57th Street, 47th Floor
New York, New York 10019
(973) 872-4423
Merger Sub is a wholly owned subsidiary of Parent and was formed on April 23, 2021, solely for the purpose of engaging in the transactions contemplated by the Merger Agreement, and has not engaged in any business activities other than in connection with the transactions contemplated by the Merger Agreement and arranging of the equity financing and debt financing in connection with the Merger.
Parent and Merger Sub are each affiliated with Standard Industries Holdings, the parent company of Standard Industries, a privately held global industrial company operating in over 80 countries with over 15,000 employees. The Standard Industries ecosystem spans a broad array of holdings, technologies and investments—including both public and private companies from early to late-stage—as well as world-class building materials assets and next-generation solar solutions. Throughout its 140-year history, Standard Industries has leveraged its deep industry expertise and vision to create outsize value across its businesses, which today include operating companies GAF, BMI, Siplast, GAF Energy, Schiedel and SGI, as well as related businesses 40 North, a multi-billion-dollar investment platform, 40 North Ventures and Winter Properties. More information about Standard Industries is available at www.standardindustries.com. Standard Industries Holdings’ related investment platform 40 North is a long-standing stockholder of Grace. At the Effective Time, the Surviving Corporation, will be directly owned by Parent.
In connection with the transactions contemplated by the Merger Agreement, (i) Standard Industries Holdings has provided Parent with an equity commitment of $3,516 million and (ii) Parent has obtained debt financing commitments in an aggregate amount of $3,455 million ($3,905 million including the revolving credit facility
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commitment) from JPMorgan Chase Bank, N.A., BNP Paribas, BNP Paribas Securities Corp., Citigroup Global Markets Inc. on behalf of certain entities affiliated with Citi, Deutsche Bank AG New York Branch, Deutsche Bank AG Cayman Islands Branch and Deutsche Bank Securities Inc. Such amounts will be used to fund the aggregate purchase price required to be paid at the closing of the Merger and to also fund certain other payments (including the Merger Amounts), subject to the terms and conditions of the Merger Agreement. In addition, Standard Industries Holdings has agreed to guarantee the payment of certain liabilities and obligations of Parent under the Merger Agreement, subject to an aggregate cap equal to $290 million, including any termination fee and amounts in respect of certain reimbursement and indemnification obligations of Parent and Merger Sub for certain costs, expenses or losses incurred or sustained by Grace, as specified in the Merger Agreement. For more information, please see the section of this proxy statement captioned “—Financing of the Merger.”
Upon the terms and subject to the conditions of the Merger Agreement, Merger Sub will merge with and into Grace and the separate corporate existence of Merger Sub will cease, with Grace continuing as the Surviving Corporation. As a result of the Merger, Grace will become a wholly owned subsidiary of Parent, and Grace common stock will no longer be publicly traded and will be delisted from the NYSE. In addition, Grace common stock will be deregistered under the Exchange Act, and we will no longer file periodic reports with the SEC. If the Merger is completed, you will not own any shares of the capital stock of the Surviving Corporation.
The Effective Time will occur upon the filing of a certificate of merger with the Secretary of State of the State of Delaware (or at such later time as we, Parent and Merger Sub may agree and specify in the certificate of merger).
If a nominee becomes unable to servethe Merger Agreement is not adopted by Grace Stockholders, or if the Merger is not completed for good causeany other reason:
the Grace Stockholders will not servebe entitled to, nor will they receive, any payment for their respective shares of Grace common stock pursuant to the Merger Agreement;
(i) Grace will remain an independent public company; (ii) Grace common stock will continue to be listed and traded on the NYSE and registered under the Exchange Act; and (iii) Grace will continue to file periodic reports with the SEC;
we anticipate that (i) management will operate the business in a manner similar to that in which it is being operated today and (ii) stockholders will be subject to similar types of risks and uncertainties as those to which they are currently subject, including, but not limited to, risks and uncertainties with respect to Grace’s business, prospects and results of operations, as such may be affected by, among other things, the highly competitive industry in which Grace operates and economic conditions;
the price of Grace common stock may decline significantly, and if that were to occur, it is uncertain when, if ever, the price of Grace common stock would return to the price at which it trades as of the date of this proxy statement;
the Board of Directors will continue to evaluate and review Grace’s business operations, strategic direction and capitalization, among other things, and will make such changes as are deemed appropriate; irrespective of these efforts, it is possible that no other transaction acceptable to the Board of Directors will be offered or that Grace’s business, prospects and results of operations will be adversely impacted; and
under specified circumstances, Grace will be required to pay Parent the Company Termination Fee of $141 million upon the termination of the Merger Agreement, as described in the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—Termination Fee.”
Grace Common Stock
At the Effective Time, each share of Grace common stock (other than Excluded Shares, which include, for example, shares of Grace common stock owned by stockholders who have properly and validly exercised their
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statutory rights of appraisal in accordance with Section 262 of the DGCL) outstanding as of immediately prior to the Effective Time will be cancelled and automatically converted into the right to receive the Merger Consideration, without interest and less any applicable withholding taxes.
After the Merger is completed, you will have the right to receive the Merger Consideration in respect of each share of Grace common stock that you own (without interest and less any applicable withholding taxes), but you will no longer have any rights as a stockholder (except that stockholders who properly exercise their appraisal rights will have a right to receive payment of the “fair value” of their shares as determined pursuant to an appraisal proceeding, as contemplated by Delaware law). For more information, please see the section of this proxy statement captioned “—Appraisal Rights.”
Treatment of Company Equity Awards
Treatment of Company Options and Company SARs. The Merger Agreement provides that each Company Option and each Company SAR that is outstanding immediately prior to the Effective Time will vest at closing and be converted into the right to receive an amount in cash equal to the product of Merger Consideration (less the applicable exercise price) and the number of shares of Common Stock covered by such Company Option or Company SAR (without interest and less applicable withholding taxes). Payment of these cash amounts will be paid within three (3) business days after the Effective Time. Any Company Option or Company SAR that has a per share exercise price that is greater than or equal to the Merger Consideration will be cancelled at the Effective Time for no consideration or payment.
Treatment of Company RSU Awards and Company Performance Share Awards. The Merger Agreement provides that each Company RSU Award and each Company Performance Share Award that is outstanding immediately prior to the Effective Time will be assumed and converted into the right to receive an amount in cash (without interest) equal to the product obtained by multiplying the Merger Consideration by the number of shares of Common Stock covered by such award immediately prior to the Effective Time, which converted cash award will be subject to continued service vesting and other terms as set forth in the Merger Agreement.
As part of its ongoing consideration and evaluation of its long-term value creation opportunities, the Board of Directors and senior management regularly review and assess the Company’s business strategies, objectives and key initiatives, including strategic opportunities and challenges, and have considered various strategic options potentially available to the Company, all with the goal of enhancing value for Grace Stockholders. The strategic considerations have focused on, among other things, the Company’s growth opportunities as well as the business environment facing the Company and its industry and have from time to time included consideration of capital structure, potential business combination, acquisition or sale transactions and other financial and strategic alternatives.
Beginning in 2018 after 40 North made its initial investment in the Company, representatives of 40 North periodically met with members of Company management to discuss the Company’s strategic direction and ongoing business plans, among other matters.
On May 7, 2018, 40 North filed with the SEC a beneficial ownership report on Schedule 13D (the “13D”), which disclosed, among other things, that 40 North had acquired beneficial ownership of 9.9% of the then-outstanding shares of Grace common stock. Thereafter, 40 North filed with the SEC several amendments to the 13D, which disclosed, among other things, successive increases in 40 North’s beneficial ownership of Grace common stock such that, as of the December 26, 2018 amendment to the 13D, 40 North reported beneficial ownership of 13.9% of the then-outstanding shares of Grace common stock.
On February 20, 2019, the Company entered into a letter agreement (the “2019 Letter Agreement”) with 40 North and certain of its affiliates pursuant to which the Company agreed to increase the size of the Board of Directors and to include Kathleen G. Reiland, an employee of 40 North, and Henry R. Slack, who had been identified by 40 North but was not associated with either 40 North or the Company, on the slate of director nominees recommended by the Board of Directors for election at the Company’s 2019 annual meeting of stockholders. Pursuant to the 2019 Letter Agreement, 40 North agreed to certain standstill restrictions and confidentiality obligations. In connection with its entry into the 2019 Letter Agreement, 40 North filed with the SEC an amendment to the 13D, which disclosed, among other things, 40 North’s beneficial ownership of 14.0% of the then-outstanding shares of Grace common stock.
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In February 2019, the Company and a potential strategic partner (“Counterparty A”), which had previously expressed an interest in exploring a potential strategic transaction with the Company, entered into a confidentiality agreement and began to engage in discussions and due diligence regarding a potential business combination transaction. Discussions and due diligence continued throughout February and March 2019.
In March 2019, a representative of the Company contacted another potential strategic partner (“Counterparty B”) on behalf of the Company to assess Counterparty B’s possible interest in a potential strategic transaction with the Company. Counterparty B indicated that it did not have an interest in further discussions regarding a transaction with the Company.
In April 2019, Counterparty A notified the Company that it would not continue to pursue a potential strategic transaction with the Company, explaining that it did not want to assume certain legacy liabilities of the Company.
On May 8, 2019, Ms. Reiland and Mr. Slack were elected to the Board of Directors at the Company’s 2019 annual meeting of stockholders for terms expiring at the Company’s annual meeting of stockholders in 2020 and 2022, respectively.
Throughout the second half of 2019 and first half of 2020, the Board of Directors continued to review the Company’s strategic alternatives, including by preliminary discussions with a significant shareholder of Counterparty A to explore possible alternative structures for a potential strategic transaction involving the Company and Counterparty A. The dialogue between the shareholder of Counterparty A and the Company during such period did not include any discussion of the valuation of the Company or the price that would be paid for shares of Grace common stock in a potential strategic transaction.
On May 12, 2020, Ms. Reiland’s term as a director expired and the proxies will voteBoard of Directors reappointed her to the Board of Directors for a Board-designated substituteterm expiring at the Company’s annual meeting of stockholders in 2021.
On August 23, 2020, Ms. Reiland sent an email to other members of the Board of Directors to raise concerns regarding the Company’s stock price performance and to urge the Board of Directors to accelerate its plans to undertake a strategic review process.
On August 30, 2020, a meeting of the Board of Directors was held, during which the Board of Directors discussed its plans to undertake a strategic review process, as it has historically undertaken from time to time. The consensus view of the Board of Directors was that the Board of Directors should undertake a strategic review process. Following discussion, the Board of Directors determined to engage Goldman Sachs and Moelis to serve as the Company’s financial advisors in conducting a strategic review of the Company’s strategic alternatives, with each of Goldman Sachs and Moelis undertaking independent analyses, in order to assist the Board of Directors in determining the best course of action to maximize long-term value for the Company and its stockholders. The Board of Directors retained each of Goldman Sachs and Moelis based upon their qualifications, experience and expertise.
On September 8, 2020, the Company’s Chief Executive Officer, Hudson La Force, met telephonically with 40 North’s principals, David J. Millstone and David S. Winter, to provide an update on the Board of Directors’ intent to conduct a strategic review with the advice and assistance of the Company’s financial advisors, Goldman Sachs and Moelis, as well as the Company’s outside counsel, Wachtell, Lipton, Rosen & Katz (“Wachtell Lipton”).
On September 9, 2020, a meeting of the Board of Directors was held, which was attended by representatives of Goldman Sachs, Moelis and Wachtell Lipton. Representatives of Goldman Sachs and Moelis separately discussed with the Board of Directors their initial perspectives on strategic alternatives potentially available to the Company and plans for a more detailed preliminary assessment scheduled for a subsequent meeting. In addition, representatives of Wachtell Lipton described to the directors their fiduciary duties in connection with evaluating strategic alternatives or ourconsidering a mergers and acquisitions process.
On October 9, 2020, a meeting of the Board may reduceof Directors was held, during which representatives of Goldman Sachs and Moelis separately presented their independent preliminary assessments regarding the numberCompany’s potential strategic alternatives, including a review of directors.the public equity market perspectives regarding the Company, a financial analysis of the Company’s standalone plan, potential counterparties to strategic transactions, and possible means of pursuing certain strategic transactions involving the Company. In the course
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of their presentations, representatives of Goldman Sachs and Moelis reviewed their independent preliminary financial analyses of the Company based on various valuation methodologies. The representatives of Goldman Sachs and Moelis each independently advised the Board of Directors that, in light of equity market volatility and dislocation due to the Covid-19 pandemic, the then-current valuation of Grace has no reasoncommon stock in public equity markets undervalued the Company relative to believeits specialty chemical peers and the Company’s intrinsic value. In addition, the representatives of Goldman Sachs and Moelis each independently advised the Board of Directors that any outreach to potential counterparties to a business combination or sale transaction should be made privately, in order to, among other things, mitigate the risk that public outreach by the Company would lead to the use of a dislocated market price of Grace common stock as a reference point for possible proposals by potential transaction counterparties rather than the Company’s intrinsic value. Following the presentations from the Company’s financial advisors and discussion among the directors, the Board of Directors directed the Company’s management and financial advisors to contact potential transaction counterparties to evaluate the possibility of a potential business combination or sale transaction involving the Company.
On October 13, 2020, Ms. Reiland delivered to the Board of Directors a letter tendering her resignation from the Board of Directors, effective immediately. In connection with Ms. Reiland’s resignation, 40 North filed with the SEC an amendment to the 13D, which disclosed, among other things, 40 North’s beneficial ownership of 14.9% of the nomineesthen-outstanding shares of Grace common stock, and to which Ms. Reiland’s resignation letter was attached as an exhibit. As a result of Ms. Reiland’s resignation, pursuant to the 2019 Letter Agreement, the standstill restrictions applicable to 40 North and its affiliates pursuant to the 2019 Letter Agreement expired 15 days following the date of her resignation.
Over the course of October, November and December 2020, Mr. La Force and representatives of the Company, including its financial advisors, at the direction of the Board of Directors, contacted five strategic parties identified by the Company, Goldman Sachs and Moelis as potentially having an interest in a potential strategic transaction involving the Company. In addition, representatives of various financial sponsors contacted Goldman Sachs and Moelis to express an interest in a possible strategic transaction involving a combination of the Company with all or a part of their portfolio companies. While certain parties held one or more meetings with the Company’s management or financial advisors, none of the parties (other than Counterparty C (as defined below)) entered into a confidentiality or standstill agreement with the Company to facilitate further discussions regarding a potential transaction.
In addition, Mr. La Force met telephonically with the Chairman of Counterparty A on multiple occasions between November 2020 and February 2021. The Chairman of Counterparty A indicated that Counterparty A could be interested in a potential strategic transaction with the Company, but did not make a proposal for election will be unablea transaction with the Company and ultimately did not continue discussions regarding such a transaction.
On November 9, 2020, 40 North sent a letter to serve.the Board of Directors, which was also filed with the SEC as an exhibit to an amendment to the 13D, pursuant to which 40 North and its affiliated investment funds proposed to acquire the Company for $60.00 per share of Grace common stock in cash, subject to certain conditions (the “November 9 Proposal”).
On November 17, 2020, Mr. La Force met telephonically with representatives of Counterparty B. Counterparty B indicated that it did not have an interest in pursuing a potential strategic transaction involving the Company at such time.
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On November 23, 2020, a meeting of the Board of Directors was held, during which Mr. La Force provided an update regarding the ongoing review of strategic alternatives and the assessment of potential transactions that would maximize the long-term value of the Company for its stockholders.
On December 4, 2020, the Chairman and Chief Executive Officer of a portfolio company of a financial sponsor, along with representatives of the financial sponsor, met telephonically with representatives of the Company to discuss a possible strategic transaction involving a combination of the Company with the portfolio company (“Counterparty C”).
On December 16, 2020, the Company and Counterparty C entered into a confidentiality agreement containing customary provisions, including a customary standstill provision that would terminate upon the occurrence of certain events, including the entry by the Company into an agreement providing for the sale or change in control of the Company. Thereafter, during the remainder of December 2020 and throughout the first three months of 2021, Counterparty C, with the assistance of its advisors, conducted due diligence on the Company, including through telephone calls and videoconferences with Company management.
On December 18, 2020, a meeting of the Board of Directors was held, during which Mr. La Force provided an update regarding the ongoing review of strategic alternatives.
On January 11, 2021, 40 North sent another letter to the Board of Directors, which was also filed with the SEC as an exhibit to an amendment to the 13D, pursuant to which 40 North and its affiliated investment funds proposed to acquire the Company for $65.00 per share of Grace common stock in cash, subject to certain conditions (the “January 11 Proposal”). This letter explained that the January 11 Proposal represented “a premium of 62% over the Company’s unaffected share price” prior to October 14, 2020, when 40 North filed an amendment to the 13D disclosing Ms. Reiland’s resignation, and “a 54% premium over the Company’s unaffected 30-day VWAP” per Bloomberg, as of October 13, 2020. 40 North disclosed that they were advised “by Citi and J.P. Morgan, and [that] they, along with Deutsche Bank and BNP Paribas, have confirmed to us in writing that they are highly confident that they will be able to arrange the necessary financing for the acquisition.” In addition, 40 North reiterated that “we have conducted extensive due diligence and analysis based on publicly available information and can reconfirm that our remaining diligence requirements are strictly confirmatory in nature and can be completed on an accelerated basis.”
On January 12, 2021, a meeting of the Board of Directors was held, which was attended by representatives of Goldman Sachs, Moelis and Wachtell Lipton, during which Mr. La Force provided an update regarding the ongoing review of strategic alternatives, including the Company’s ongoing engagement with Counterparty C. The Board of Directors reviewed 40 North’s January 11 Proposal and determined that it would be in the best interests of the Company to respond to 40 North by offering to enter into a customary confidentiality agreement with 40 North, so that the Company might provide 40 North with additional information, and to engage with 40 North in discussions regarding 40 North’s proposal, in order for 40 North to be in a position to potentially further increase the value of its offer.
On January 15, 2021, in response to 40 North’s January 11 Proposal, the Company sent a letter to Messrs. Millstone and Winter, the text of which was included in a press release issued by the Company. The letter explained that the Board of Directors had “met and discussed [40 North’s] revised proposal [and is] willing to discuss a sale of Grace to 40 North in the context of [Grace’s] ongoing review of strategic alternatives. Any transaction would need to be at a price level that reflects the full value of Grace for its shareholders.” The Company’s letter conveyed that the Company “would be willing to share with [40 North], under customary and appropriate confidentiality arrangements, information that would support a full valuation of Grace.”
Over the course of January 14 and 15, 2021, members of management of the Company and representatives of Counterparty C, including their financial advisors, held a series of meetings by videoconference to present information regarding each of their respective businesses, managements, strategies and financial attributes.
On January 18, 2021, representatives of Wachtell Lipton provided a draft confidentiality agreement (the “2021 Confidentiality Agreement”) to representatives of Sullivan & Cromwell LLP (“Sullivan & Cromwell”), outside counsel to 40 North.
On January 21, 2021, a meeting of the nominees qualifiesBoard of Directors was held, during which Mr. La Force provided an update regarding the ongoing review of strategic alternatives, including the discussions with Counterparty C and its evaluation of a potential strategic transaction involving the Company, as well as the status of negotiations of
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the 2021 Confidentiality Agreement with 40 North. The Board of Directors directed the Company’s management to continue to negotiate the 2021 Confidentiality Agreement with 40 North and, following its execution, proceed with furnishing certain due diligence information to 40 North so that it might be in a position to potentially further increase the value of its offer.
Also on January 21, 2021, representatives of Sullivan & Cromwell provided a revised draft of the 2021 Confidentiality Agreement to representatives of Wachtell Lipton, and over the course of the final two weeks of January 2021, representatives of Wachtell Lipton and Sullivan & Cromwell continued to exchange drafts of the 2021 Confidentiality Agreement.
On January 22, 2021, representatives of the Company and Counterparty C, including their respective financial advisors, met by videoconference to discuss certain financial analyses with respect to, and the potential synergies that might be realized by, a hypothetical combined company in order that such parties might determine whether to pursue a potential business combination transaction.
On February 1, 2021, the Company entered into the 2021 Confidentiality Agreement with 40 North and certain of its affiliates. In the 2021 Confidentiality Agreement, 40 North and its affiliates agreed, among other things, to comply with certain standstill restrictions until March 31, 2021, subject to the earlier termination of such restrictions in certain circumstances. The Company agreed, among other things, that the Board of Directors would consider timely any nomination by 40 North of director candidates for the Company’s 2021 annual meeting of stockholders delivered to the Company on or before the fifteenth (15th) day following the expiration or termination of the standstill restrictions.
On February 8, 2021, 40 North and certain of its advisors were provided with access to an electronic data room containing confidential due diligence information with respect to the Company. Thereafter, throughout February, March and April 2021, 40 North, with the assistance of its advisors, conducted additional due diligence on the Company, including through telephone calls and videoconferences with Company management.
On February 15, 2021, members of management of the Company, including its financial advisors, held a series of meetings by videoconference with representatives of 40 North to present information regarding the Company’s business, its management, strategy and financial attributes.
On February 17, 2021, representatives of the Company and Counterparty C, including their respective financial advisors, again met by videoconference to discuss the potential synergies that might be realized by a hypothetical combined company.
On February 22, 2021, Counterparty C delivered a letter from its Chairman and Chief Executive Officer to Mr. La Force, which letter proposed an all-stock merger with Counterparty C (the “February 22 Proposal”), subject to certain conditions. Counterparty C’s February 22 Proposal indicated that Grace Stockholders would retain a 36%-37% ownership interest in the combined company. A financial analysis of Counterparty C’s February 22 Proposal conducted by the Company’s financial advisors indicated that the proposal implied an upfront value per share of Grace common stock (before giving effect to synergies) that was less than the $65.00 per share offered by 40 North in its January 11 Proposal. The financial analysis also indicated that Counterparty C’s February 22 Proposal did not reflect that, based on the information about Counterparty C available to the Company and its advisors at the time, the Company should be valued at a premium multiple relative to the business of Counterparty C proposed to be combined with the Company, even before accounting for a change-of-control premium for the Company’s stockholders.
On February 24, 2021, Mr. La Force contacted the Chairman and Chief Executive Officer of Counterparty C to express disappointment in the economic terms implied by the proposal, in particular that such terms implied a change of control of the Company without offering an adequate premium. Mr. La Force and the Chairman and Chief Executive Officer of Counterparty C agreed to continue discussions and due diligence, and that the Company and Counterparty C would continue to engage with their respective financial advisors so that Counterparty C might submit a revised proposal that would provide greater value to Grace Stockholders.
On February 25, 2021, a meeting of the Board of Directors was held, during which Mr. La Force updated the other members of the Board of Directors regarding the Company’s ongoing engagement with Counterparty C and 40 North. During the meeting, Mr. La Force and the other members of the Board of Directors reviewed the terms of Counterparty C’s February 22 Proposal and considered it in the context of 40 North’s January 11 Proposal. The Board of Directors discussed Mr. La Force’s response to the Chairman and Chief Executive
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Officer of Counterparty C, and expressed their concurrence with Mr. La Force’s encouragement of continued engagement between the Company and Counterparty C so that Counterparty C might submit a proposal on terms that could be compelling to the Company. The Board of Directors also directed the Company’s management and financial advisors to continue to provide due diligence information to 40 North so that it might be in a position to potentially further increase the value of its offer.
Throughout March 2021, representatives of the Company, including at various times Mr. La Force and the Company’s financial advisors and outside counsel, participated in discussions with representatives of Counterparty C with a view to obtaining additional information from Counterparty C regarding its business and proposed valuation, improving Counterparty C’s proposal and exploring potential transaction structures.
On March 7, 2021, a meeting of the Board of Directors was held, during which the Board of Directors reviewed Counterparty C’s February 22 Proposal and considered it in the context of 40 North’s January 11 Proposal as well as the Company’s standalone strategic plan. The Board of Directors discussed that Counterparty C’s February 22 Proposal depended on valuation assumptions regarding Counterparty C that the Company was not in a position to verify given that Counterparty C was privately held, whereas the material information regarding the Company was publicly disclosed. The Board of Directors discussed that the Company would need additional information from Counterparty C to verify its proposed valuation of itself relative to the Company and that, to date, Counterparty C was unwilling to proceed with mutual due diligence. Therefore, the Board of Directors directed the Company’s management to further engage with Counterparty C, including to respond with a counteroffer to the February 22 Proposal and to seek to facilitate mutual due diligence, in order to determine whether Counterparty C would make an actionable proposal for a potential business combination transaction, while also continuing to engage in the active due diligence process with 40 North to enable 40 North to complete its due diligence review of the Company and submit its best and final offer to acquire the Company.
On March 8, 2021, Mr. La Force called the Chairman and Chief Executive Officer of Counterparty C to convey a counteroffer, in response to Counterparty C’s February 22 Proposal and subject to further due diligence, of a relative valuation that would result in Grace Stockholders retaining a 45% ownership interest in the combined company.
On March 12, 2021, the Chairman and Chief Executive Officer of Counterparty C met telephonically with Mr. La Force and conveyed to Mr. La Force a revised proposal for an all-stock merger between the Company and Counterparty C (the “March 12 Proposal”), subject to certain conditions. Counterparty C’s March 12 Proposal indicated that Grace Stockholders would retain a 39%-40% ownership interest in the combined company.
On March 17, 2021, Mr. La Force met telephonically with the Chairman and Chief Executive Officer of Counterparty C to convey a counteroffer, in response to Counterparty C’s March 12 Proposal and subject to further due diligence, of a relative valuation that would result in Grace Stockholders retaining a 41%-42% ownership interest in the combined company.
In a March��19, 2021 email to Mr. La Force, the Chairman and Chief Executive Officer of Counterparty C reiterated the ownership range contemplated by the March 12 Proposal.
On March 22, 2021, Mr. La Force met telephonically with representatives of Counterparty C to discuss Counterparty C’s March 12 Proposal and the additional work, including due diligence and consideration of transaction structures and mechanics, that would be required to progress discussions toward an actionable proposal. During this conversation and various conversations between the advisors to the Company and the advisors to Counterparty C, Counterparty C was unwilling to commit to further improvements to its offer or to advance with any mutual due diligence without an agreement in principle on the relative valuation implied by Counterparty C’s March 12 Proposal.
On March 25, 2021, a meeting of the Board of Directors was held, which was attended by representatives of Goldman Sachs, Moelis and Wachtell Lipton, during which Mr. La Force updated the other members of the Board of Directors regarding the ongoing engagement with Counterparty C and 40 North. Mr. La Force advised the Board of Directors that, in recent discussions, Counterparty C had not been willing to improve the terms of its offer or proceed with further engagement until the Company agreed in principle to the relative valuation implied by Counterparty C’s March 12 Proposal. Mr. La Force also described the status of the ongoing due diligence process undertaken by 40 North, and explained that the Company was continuing to provide
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information in the virtual data room and organize due diligence calls in an effort to finalize the diligence process and advance the negotiation of deal terms and transaction documentation. Shortly following the conclusion of the Board of Directors’ meeting, at the direction of the Board of Directors, representatives of the Company delivered to representatives of 40 North a bid instruction letter with directions for 40 North’s submission of a final, definitive, binding proposal, including details regarding purchase price, financing, closing certainty and timing, as well as mark-ups of key transaction documents to be provided by the Company.
On March 25, 2021, Mr. La Force wrote the Chairman and Chief Executive Officer of Counterparty C to reiterate that the Company could not commit to the valuation range implied by Counterparty C’s March 12 Proposal and that any change-of-control combination must be at a valuation that compared favorably at the outset with other available alternatives. Mr. La Force suggested that the parties progress their engagement by proceeding with more advanced mutual due diligence and transaction-structuring discussions, without commitments of either party to a specific valuation range.
On March 27, 2021, the Chairman and Chief Executive Officer of Counterparty C responded to Mr. La Force to confirm that it had not identified any means of reaching a compromise on valuation, including in light of the alternatives available to the Company. The Chairman and Chief Executive Officer of Counterparty C further explained that Counterparty C would not agree to mutual due diligence without an agreement in principle on relative valuation.
On March 30, 2021, representatives of Wachtell Lipton sent to representatives of 40 North, including Sullivan & Cromwell, an initial draft of a Merger Agreement and Voting Agreement reflecting, among other things, (1) a termination fee equal to 2.0% of the Company’s equity value payable by the Company upon a termination of the Merger Agreement under certain circumstances, (2) a reverse termination fee equal to 10.0% of the Company’s equity value payable by Parent upon a termination of the Merger Agreement under certain circumstances and (3) a right of the Company to continue to pay, during the pendency of the Merger, a dividend to Grace Stockholders consistent with its historical practice. On March 31, 2021, representatives of Wachtell Lipton sent an initial draft of the confidential disclosure schedules to the Merger Agreement to representatives of 40 North, including Sullivan & Cromwell.
On April 1, 2021, following the expiration of the standstill provisions of the 2021 Confidentiality Agreement entered into by the Company and 40 North on February 1, 2021, 40 North delivered another letter to the Board of Directors, which was also filed with the SEC as an exhibit to an amendment to the 13D, pursuant to which 40 North and its affiliated investment funds proposed to acquire the Company for $70.00 per share of Grace common stock in cash, subject to certain conditions (the “April 1 Proposal”). 40 North’s letter explained that the April 1 Proposal did not include any financing contingency, and that 40 North’s financing banks were Citi, J.P. Morgan, Deutsche Bank and BNP Paribas. In its letter, 40 North expressed its confidence that all necessary regulatory approvals could be received in a timely manner. 40 North noted that it had “engaged numerous advisers, consultants and specialists to further [its] analysis of the various facets of [the Company’s] business” and explained that its proposal was “subject only to confirmatory diligence, which [40 North] expect[ed] to be able to complete in two weeks, and the execution of definitive documentation.” 40 North’s proposal letter characterized the April 1 Proposal as 40 North’s “best and final offer.”
Shortly thereafter on April 1, 2021, Mr. La Force sent a letter to Messrs. Millstone and Winter, the text of which was included in a press release issued by the Company. In this letter, Mr. La Force acknowledged the Company’s receipt of 40 North’s April 1 Proposal and reiterated the Company’s requests for the information described in the Company’s bid instruction letter provided to 40 North on March 25, 2021, including the details of 40 North’s debt and equity financing commitments, as well as any comments on the draft transaction documentation previously provided to 40 North.
On April 5, 2021, representatives of 40 North provided to representatives of the Company a revised draft of the Merger Agreement, as well as additional draft transaction documentation, including drafts of the Equity and Debt Commitment Letters and the Limited Guaranty. The delivery of the transaction documentation was confirmed by 40 North on April 6, 2021 in a letter from Messrs. Millstone and Winter to Mr. La Force, which letter was also filed with the SEC as an exhibit to an amendment to the 13D. 40 North’s revised draft of the Merger Agreement provided for, among other things, (1) a termination fee equal to 4.0% of the Company’s equity value payable by the Company upon a termination of the Merger Agreement under certain circumstances,
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(2) a reverse termination fee equal to 5.0% of the Company’s equity value payable by Parent upon a termination of the Merger Agreement under certain circumstances and (3) a requirement for the Company to obtain Parent’s consent prior to paying dividends to Grace Stockholders during the pendency of the Merger.
On April 6, 2021, Moelis met telephonically with the Chairman and Chief Executive Officer of Counterparty C to assess Counterparty C’s interest in re-engaging in discussions or submitting a proposal for a strategic transaction that might be competitive with 40 North’s April 1 Proposal. The Chairman and Chief Executive Officer of Counterparty C explained that a representative of Counterparty C would contact the Company or its representatives if it had an interest in re-engaging in discussions regarding a potential strategic transaction, but thereafter no such contact was made.
On April 7, 2021, a meeting of the Board of Directors was held, during which members of the Company’s senior management and representatives of Wachtell Lipton, Goldman Sachs and Moelis were present. At the meeting, the Board of Directors discussed the Company’s ongoing strategic review, including 40 North’s April 1 Proposal and preliminary financial analyses of the April 1 Proposal. The Board of Directors discussed that Counterparty C had neither demonstrated a willingness to compromise further on relative valuation nor engage in due diligence or other transaction discussions without an agreement on an upfront valuation that did not compare favorably to 40 North’s April 1 Proposal, as well as that Counterparty C had not expressed any interest in re-engaging in discussions. The Board of Directors also discussed the Company’s solicitation activity during its outreach to potential transaction counterparties and the fact that, despite the fact that it had been widely and publicly known for months that Grace was conducting a strategic review process and was engaged in discussions with 40 North, there had been no other indications of interest from other potential counterparties to a strategic business combination or sale transaction. Following the discussion, it was the consensus of the Board of Directors that the Company should proceed in discussions with 40 North on the basis of its April 1 Proposal, contingent on 40 North obtaining acceptable financing commitments and the negotiation of definitive transaction documentation with terms that would be protective of Grace Stockholders and customary for transactions of a similar type and size.
On April 9, 2021, representatives of Wachtell Lipton sent to representatives of Sullivan & Cromwell revised drafts of the Merger Agreement and related transaction and financing documentation. The revised draft of the Merger Agreement provided for, among other things, (1) a termination fee equal to 2.5% of the Company’s equity value payable by the Company upon a termination of the Merger Agreement under certain circumstances, (2) a reverse termination fee equal to 8.0% of the Company’s equity value payable by Parent upon a termination of the Merger Agreement under certain circumstances and (3) the right of the Company to continue to pay, during the pendency of the Merger, a dividend to Grace Stockholders consistent with its historical practice.
On April 14, 2021, at 40 North’s request in order for 40 North and its financing sources to complete their due diligence, the Company entered into an amendment to the 2021 Confidentiality Agreement with 40 North and certain of its affiliates, pursuant to which the Company agreed to extend the nomination deadline for 40 North to submit candidates for election as a member of our Board. In making this determination, our Board believes that its membership should be composed of directors who have the highest integrity, a diversity of experience, the education and ability to understand business problems and evaluate and propose solutions, the personality to work well with others, a dedication to the Company’s Board of Directors at the Company’s 2021 annual meeting of stockholders to April 26, 2021. The Company and 40 North also agreed not to make any further public statements regarding the other party or the ongoing discussions between the parties prior to April 26, 2021.
Between April 14, 2021 and April 25, 2021, representatives of Wachtell Lipton exchanged drafts of the Merger Agreement and the other transaction documents with representatives of Sullivan & Cromwell and negotiated the terms of such documents.
On April 14, 2021, representatives of Sullivan & Cromwell sent to representatives of Wachtell Lipton a revised draft of the Merger Agreement that did not specify proposed termination fee or reverse termination fee amounts but provided for, among other things, a requirement for the Company to obtain Parent’s consent prior to paying dividends to Grace Stockholders during the pendency of the Merger.
On April 16, 2021, representatives of Wachtell Lipton sent to representatives of Sullivan & Cromwell a revised draft of the Merger Agreement that provided for, among other things, (1) a termination fee equal to 3.0% of the Company’s equity value payable by the Company upon a termination of the Merger Agreement
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under certain circumstances, (2) a reverse termination fee equal to 8.0% of the Company’s equity value payable by Parent upon a termination of the Merger Agreement under certain circumstances and (3) the right of the Company to continue to pay, during the pendency of the Merger, a dividend to Grace Stockholders consistent with its historical practice.
On April 22, 2021, representatives of Sullivan & Cromwell sent to representatives of Wachtell Lipton a revised draft of the Merger Agreement that did not specify proposed termination fee or reverse termination fee amounts but provided for, among other things, a requirement for the Company to obtain Parent’s consent prior to paying dividends to Grace Stockholders during the pendency of the Merger.
On April 24, 2021, representatives of Wachtell Lipton sent to representatives of Sullivan & Cromwell a revised draft of the Merger Agreement that provided for, among other things, (1) a termination fee equal to 3.0% of the Company’s equity value payable by the Company upon a termination of the Merger Agreement under certain circumstances, (2) a reverse termination fee equal to 6.0% of the Company’s equity value payable by Parent upon a termination of the Merger Agreement under certain circumstances and (3) the right of the Company to continue to pay, during the pendency of the Merger, a dividend to Grace Stockholders consistent with its historical practice.
Early in the morning of April 25, 2021, representatives of Sullivan & Cromwell sent to representatives of Wachtell Lipton a revised draft of the Merger Agreement that, consistent with the Company’s prior proposal, provided for, among other things, a termination fee equal to 3.0% of the Company’s equity value payable by the Company upon a termination of the Merger Agreement under certain circumstances and a reverse termination fee equal to 6.0% of the Company’s equity value payable by Parent upon a termination of the Merger Agreement under certain circumstances. The revised draft of the Merger Agreement also included a requirement for the Company to obtain Parent’s consent prior to paying dividends to Grace Stockholders during the pendency of the Merger.
On April 25, 2021, a meeting of the Board of Directors was held, during which members of the Company’s senior management and representatives of Wachtell Lipton, Goldman Sachs and Moelis were present. Mr. La Force presented to the other members of the Board of Directors an update on the negotiations with 40 North and Standard Industries Holdings regarding the proposed acquisition of the Company, including the terms of the draft transaction documentation. A representative of Wachtell Lipton described to the directors their fiduciary duties in connection with their consideration of the proposed transaction. Representatives of Goldman Sachs presented the financial analysis undertaken by Goldman Sachs regarding the proposed transaction, including by reference to presentation materials which had been made available to the Board of Directors prior to the meeting. After discussion among the Board of Directors and the Company’s advisors, Goldman Sachs delivered its oral opinion, to be confirmed by delivery of a written opinion, dated April 26, 2021, to the Board of Directors to the effect that, as of such date and based upon and subject to the various matters, limitations, qualifications and assumptions set forth therein, the Merger Consideration to be paid to the holders (other than Parent and its affiliates) of Grace common stock in the proposed transaction was fair, from a financial point of view, to such holders. Representatives of Moelis then presented the financial analysis undertaken by Moelis regarding the proposed transaction, including by reference to presentation materials which had been made available to the Board of Directors prior to the meeting. After discussion among the Board of Directors and the advisors, Moelis rendered its oral opinion, to be subsequently confirmed by delivery of a written opinion, dated April 26, 2021, to the Board of Directors to the effect that, as of such date and based upon and subject to the assumptions made, procedures followed, matters considered and limitations on the review undertaken set forth therein, the Merger Consideration to be received by the holders of shares of Grace common stock (other than the Supporting Stockholder, Parent, Merger Sub, any other subsidiary of Parent, the Company or any other wholly owned subsidiary of the Company) in the Merger was fair from a financial point of view to such holders. Representatives of Wachtell Lipton reviewed the terms of the draft Merger Agreement and other transaction documentation, including by reference to a summary of the agreements and drafts of the agreements, which had been made available to the Board of Directors prior to the meeting. Following discussion among the Board of Directors, the members of the Company’s senior management and representatives of the Company’s advisors, the Board of Directors instructed Mr. La Force to engage with Messrs. Millstone and Winter and attempt to reach a compromise on the outstanding issues in the Merger Agreement. Following a series of adjournments while Mr. La Force engaged in further discussions with Messrs. Millstone and Winter, Mr. La Force and Messrs. Winter and Millstone agreed to a compromise. When the meeting was finally reconvened later in the evening of
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April 25, the Board of Directors then engaged in a general discussion of the potential transaction and the matters summarized for the Board of Directors at the meeting, including asking questions of the Company’s advisors and senior management. Following this discussion, and after carefully considering the proposed terms of the transaction, and taking into consideration the matters discussed during the meeting and prior meetings of the Board of Directors, the Board of Directors unanimously (i) determined that it is in the best interests of our shareholders, a reasoned commitmentthe Company and its stockholders, and declared it advisable, to our social responsibilities,enter into the Merger Agreement; (ii) approved the execution, delivery and performance of the Merger Agreement by the Company and the availabilityconsummation of timethe transactions contemplated by the Merger Agreement; and (iii) resolved to meet their responsibilities as directors. Ourrecommend that Grace Stockholders approve the adoption of the Merger Agreement and the consummation of the transactions contemplated thereby.
Early in the morning of April 26, 2021, the parties executed and delivered the Merger Agreement, Voting Agreement, Equity Commitment Letter, Limited Guaranty and Debt Commitment Letter. Shortly thereafter, the parties issued a press release announcing the transaction.
Recommendation of the Board further believes that a substantial majority of its membership should be independent. OurDirectors; Reasons for the Merger
Recommendation of the Board of Directors
The Board of Directors has unanimously: (i) determined that Mses. Fasone Holder and Gulyas, and Mr. Quinn qualify, and that Ms. Reiland and Mr. Slack would qualify, as independent directors under applicable rules and regulations and Grace’s independence standards. See information contained in the "Corporate Governance—Number and Independence of Directors" section of this Proxy Statement, below.
Reasons for the Merger
In the course of reaching its determination and Corporate Responsibility Committee. Only independent directors, as independence is determined in accordancerecommendation, the Board of Directors consulted with NYSE rules, are permitted to serve on the standing committees.Grace management, Wachtell Lipton, Goldman Sachs and Moelis. The Board annually selects, from amongof Directors considered a number of factors, including those below (which are not listed in any relative order of importance), all of which it viewed as generally supporting its members,(i) approval of the membersexecution, delivery and Chairperformance of each standing committee.the Merger Agreement by Grace and the consummation of the transactions contemplated by the Merger Agreement; and (ii) resolution to recommend that Grace Stockholders approve the adoption of the Merger Agreement and the consummation of the transactions contemplated thereby:
the belief of the Board of Directors, based upon the course and history of negotiations with 40 North and Standard Industries Holdings (as described in more detail under the section of this proxy statement captioned “—Background of the Merger”), that the Merger Consideration represents the highest price that Parent was willing to pay and that the terms of the Merger Agreement include the most favorable terms to the Company, in the aggregate, to which Parent was willing to agree;
the Board of Directors’ consideration of the strategic alternatives reasonably available to Grace, including the results of the strategic review process undertaken by Grace with the assistance of its financial advisors described in the section of this proxy statement captioned “—Background of the Merger”;
the fact that, during the course of such strategic review process, other than Counterparty C, no strategic parties or financial sponsors made a proposal to Grace with respect to current standing committee membershipsa strategic business combination or sale transaction;
the fact that, despite the fact that it had been widely and publicly known for months that Grace was conducting a strategic review process and was engaged in discussions with 40 North (as described in
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more detail under the section of this proxy statement captioned “—Background of the directorsMerger”), there had been no indications of interest from other potential counterparties (other than 40 North and Counterparty C) to a strategic business combination or sale transaction;
the fact that, as described in the section of this proxy statement captioned “—Background of the Merger,” Counterparty C would not agree to mutual due diligence without an agreement in principle on a relative valuation that did not compare favorably other strategic alternatives reasonably available to the Company;
the fact that, despite an invitation to Counterparty C from representatives of the Company to re-engage in discussions following 40 North’s best and final April 1 Proposal, Counterparty C did not express any interest in re-engaging in discussions or submitting a proposal that might be competitive with 40 North’s April 1 Proposal (as described in more detail under the section of this proxy statement captioned “—Background of the Merger”);
the high degree of certainty that the closing would be achieved in a timely manner, in view of the terms of the Merger Agreement;
the view of the Board of Directors that the Merger Consideration was more favorable to Grace Stockholders on a risk-adjusted basis than the potential value that might result from other alternatives reasonably available to Grace, based upon the Board of Directors’ extensive knowledge of Grace’s business, assets, financial condition and results of operations, its competitive position and historical and projected financial performance, and the belief that the Merger Consideration represented an attractive and comparatively certain value for Grace Stockholders relative to the risk-adjusted prospects for Grace on a standalone basis;
the fact that the Supporting Stockholder, the Company’s most significant stockholder and a long-term investor in the Company, was prepared to execute and deliver the Voting Agreement;
the financial analysis presentation of Goldman Sachs, and the oral opinion of Goldman Sachs, subsequently confirmed by delivery of a written opinion, dated April 26, 2021, to the Board of Directors to the effect that, as of March 12, 2019. such date and based upon and subject to the various matters, limitations, qualifications and assumptions set forth therein, the Merger Consideration to be paid to the holders (other than Parent and its affiliates) of Grace common stock in the Merger was fair, from a financial point of view, to such holders, as more fully described below under the section of this proxy statement captioned “—Opinion of Goldman Sachs & Co. LLC,” the full text of which written opinion is attached as Annex B to this proxy statement and is incorporated by reference in this proxy statement in its entirety;
the financial analysis presentation of Moelis, and the oral opinion of Moelis, subsequently confirmed by delivery of a written opinion, dated April 26, 2021, to the Board of Directors to the effect that, as of such date and based upon and subject to the assumptions made, procedures followed, matters considered and limitations on the review undertaken set forth therein, the Merger Consideration to be received by the holders of shares of Grace common stock (other than the Supporting Stockholder, Parent, Merger Sub, any other subsidiary of Parent, the Company or any other wholly owned subsidiary of the Company) in the Merger was fair from a financial point of view to such holders, as more fully described below under the section of this proxy statement captioned “—Opinion of Moelis & Company LLC,” the full text of which written opinion is attached as Annex C to this proxy statement and is incorporated by reference in this proxy statement in its entirety;
the terms and conditions of the Merger Agreement and the other transaction documents, including the following:
Grace’s ability to terminate the Merger Agreement in order to accept a Superior Company Proposal, subject to certain conditions of the Merger Agreement and paying Parent the Company Termination Fee of $141 million – an amount which the Board of Directors believed, based upon the advice of its financial and legal advisors, was unlikely to deter third parties from making Company Takeover Proposals;
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the conditions to closing contained in the Merger Agreement, which are limited in number and scope, and which, in the case of the condition related to the accuracy of Grace’s representations and warranties, is generally subject to a Company Material Adverse Effect (as defined in the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—Representations and Warranties”) qualification;
the requirement that the Merger Agreement be adopted by the affirmative vote of the holders of a majority of the outstanding shares of Grace common stock entitled to vote at the Special Meeting;
the fact that Grace has sufficient operating flexibility to conduct its business in the ordinary course prior to the consummation of the Merger;
the provision of the Merger Agreement allowing the Board of Directors to effect a Company Adverse Recommendation Change and to terminate the Merger Agreement, in certain circumstances relating to the presence of a Superior Company Proposal (or to effect a change of recommendation in response to an intervening event) subject to the applicable procedures, terms and conditions set forth in the Merger Agreement (including, if applicable, payment of termination fees) (for more information, see the sections of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—Company Board Recommendation; Company Adverse Recommendation Change,” “Proposal 1: Adoption of the Merger Agreement—Termination of the Merger Agreement” and “Proposal 1: Adoption of the Merger Agreement—Termination Fee”);
the absence of a financing condition in the Merger Agreement;
the limited overlaps between the businesses of Grace and Parent relative to those that could be present in transactions with certain other industry participants;
the end date of January 26, 2022 (subject to extension to April 26, 2022 under certain circumstances, including for purposes of obtaining required regulatory approvals) allowing for sufficient time to complete the Merger;
that Parent has obtained committed debt financing for the transaction from reputable financial institutions and committed equity financing for the transaction from Standard Industries Holdings, an affiliated entity of Parent, that together provide funding of an amount sufficient to cover the aggregate Merger Consideration, all fees and expenses payable by Parent, Merger Sub or Grace and the repayment or refinancing of certain indebtedness required to be repaid or refinanced;
that Parent has announced that the equity commitment from Standard Industries Holdings will be supported by (i) the available cash of Standard Industries Holdings’ subsidiary, Standard Industries Inc. and (ii) up to $2,500 million in proceeds from a secured term loan;
the obligation of Parent and Merger Sub to use reasonable best efforts to consummate the financing and the limited number and nature of the conditions to the debt and equity financing;
the Company’s ability, under circumstances specified in the Merger Agreement, to specifically enforce the obligations of Parent and Merger to consummate the Merger; and
the requirement that, in the event of a failure of the Merger to be consummated under certain circumstances, Parent will pay the Company the Parent Termination Fee of $281 million, and the obligation to pay such amount by Standard Industries Holdings, pursuant to the terms of a limited guaranty, as more fully described under the section of this proxy statement captioned “—Financing of the Merger—Equity Financing” and “—Financing of the Merger—Guaranty.”
the availability of appraisal rights under Delaware law to holders of shares of Grace common stock who do not vote in favor of the adoption of the Merger Agreement and comply with all of the required procedures under Delaware law, which provides those eligible stockholders with an opportunity to have a Delaware court determine the fair value of their shares, which may be more than, less than, or the same as the amount such stockholders would have received under the Merger Agreement; and
the fact that, in the absence of the Merger, Grace would continue to incur significant expenses by remaining a public company, including legal, accounting, transfer agent, printing and filing fees, and that those expenses could adversely affect Grace’s financial performance and the value of its shares.
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The tableBoard of Directors also sets forth theconsidered a number of meetings (including teleconference meetings) held by each Board committeeuncertainties and risks concerning the Merger, including the following (which factors are not necessarily presented in 2018. We reimburse directors for expenses they incurorder of relative importance):
the fact that Grace would no longer exist as an independent, publicly traded company, and stockholders would no longer participate in attending Boardany future earnings or growth and committee meetingswould not benefit from any potential future appreciation in value of Grace;
the risks and costs to Grace if the Merger is not completed in a timely manner or at all, including the potential adverse effect on Grace’s ability to attract and retain key personnel, the diversion of management resources and the potential disruptive effect on Grace’s day-to-day operations and Grace’s relationships with employees, customers, suppliers, partners and other activities incidental to their service as directors, but we do notthird parties, any or all of which risks and costs, among other things, could adversely affect Grace’s overall competitive position and the trading price of its common stock;
the requirement under certain circumstances that Grace pay our directors any separate meeting fees.
| Director | Audit | Compensation | Nominating and Governance | Corporate Responsibility | ||||
| Robert F. Cummings, Jr. | ü | ü | ü | ü | ||||
| Julie Fasone Holder | ü | ü | ü | * | ||||
| Alfred E. Festa | ||||||||
| Diane H. Gulyas | ü | * | ü | ü | ||||
| Hudson La Force | ||||||||
| Jeffry N. Quinn | ü | ü | ü | ü | ||||
| Christopher J. Steffen‡ | ü | ü | * | ü | ||||
| Mark E. Tomkins | * | ü | ü | ü | ||||
| Shlomo Yanai | ü | ü | ü | ü | ||||
| Number of 2018 Meetings | 5 | 6 | 3 | 2 | ||||
the fact that, under the terms of the Merger Agreement, if Parent fails to complete the Merger as it deems appropriate,a result of failure to independently engage outside legal, accountingobtain the Debt Financing (as defined in the section of this proxy statement captioned “The Merger—Financing of the Merger”), the Company’s remedies will be limited to the termination fee payable by Parent described above, which may be inadequate to compensate Grace for the damage caused;
the restrictions on the conduct of Grace’s business prior to the consummation of the Merger, which may delay or prevent Grace from undertaking business opportunities that may arise before the completion of the Merger and that, absent the Merger Agreement, Grace might have pursued;
the fact that an all cash transaction would be taxable to Grace’s stockholders that are U.S. persons for U.S. federal income tax purposes;
the fact that under the terms of the Merger Agreement, subject to certain exceptions, Grace is unable to solicit other Company Takeover Proposals;
the significant costs involved in connection with entering into the Merger Agreement and completing the Merger (many of which are payable whether or not the Merger is consummated) and the substantial time and effort of Grace management required to complete the Merger, which may disrupt its business operations and have a negative effect on its financial results;
the risk that the Merger might not be completed and the effect of the resulting public announcement of termination of the Merger Agreement on the trading price of Grace common stock;
the fact that the completion of the Merger requires certain regulatory clearances and consents, which clearances and consents could subject the Merger to unforeseen delays and risks;
the fact that Grace’s directors and officers may have interests in the Merger that may be different from, or in addition to, those of Grace’s stockholders generally (see below under the caption “—Interests of Executive Officers and Directors of Grace in the Merger”); and
the possible loss of key management or other advisors or consultants. In addition, each standing committee annually conducts a review and evaluationpersonnel of its performance and reviews and reassesses its charter. You can findGrace during the current charterspendency of each standing committee on our website www.grace.com/en-us/corporate-leadership/Pages/Governance.aspx.
The Audit Committee has been established in accordance withforegoing discussion of reasons for the provisionsrecommendation to approve the adoption of the Securities Exchange Act of 1934, as amended, or Exchange Act,Merger Agreement is not meant to be exhaustive but addresses the rules ofmaterial information and factors considered by the NYSE and our Corporate Governance Principles. The Audit Committee assists our Board of Directors in overseeing:consideration of its recommendation. In view of the wide variety of factors considered by the Board of Directors in connection with its evaluation of the Merger and the complexity of these matters, the Board of Directors did not find it practicable to, and did not, quantify or otherwise assign relative weights to the specific factors considered in reaching its determination and recommendation. Rather, in considering the information and factors described above, individual members of the Board of Directors each applied his or her own personal business judgment to the process and may have given differing weights to differing factors.
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The Board of Directors based its unanimous recommendation on the totality of the information presented. The explanation of the factors and reasoning set forth above contain forward-looking statements that should be read in conjunction with the section of this proxy statement captioned “Forward-Looking Statements.”
Goldman Sachs rendered its opinion to the Board of Directors that, as of April 26, 2021 and based upon and subject to the factors and assumptions set forth therein, the Merger Consideration to be paid to the holders (other than Parent and its affiliates) of Grace common stock pursuant to the Merger Agreement was fair from a financial point of view to such holders.
The full text of the written opinion of Goldman Sachs, dated April 26, 2021, which sets forth assumptions made, procedures followed, matters considered and limitations on the review undertaken in connection with the opinion, is attached as Annex B to this proxy statement. The summary of Goldman Sachs’ opinion contained in this proxy statement is qualified in its entirety by reference to the full text of Goldman Sachs’ written opinion. Goldman Sachs provided advisory services and its opinion for the information and assistance of the Board of Directors in connection with its consideration of the Merger. The Goldman Sachs opinion is not a recommendation as to how any holder of Grace common stock should vote with respect to the Merger or any other matter.
In connection with rendering the opinion described above and performing its related financial analyses, Goldman Sachs reviewed, among other things:
the integrityMerger Agreement;
annual reports to Grace Stockholders and Annual Reports on Form 10-K of Grace for the five fiscal years ended December 31, 2020;
certain interim reports to Grace Stockholders and Quarterly Reports on Form 10-Q of Grace;
certain other communications from Grace to the Grace Stockholders;
certain publicly available research analyst reports for Grace; and
certain internal financial analyses and forecasts for Grace prepared by its management, as approved for Goldman Sachs’ use by Grace (as described in the section of this proxy statement captioned “—Management Projections”).
Goldman Sachs also held discussions with members of the senior management of Grace regarding their assessment of the past and current business operations, financial condition and future prospects of Grace; reviewed the reported price and trading activity for the Grace common stock; compared certain financial and stock market information for Grace with similar information for certain other companies the securities of which are publicly traded; reviewed the financial terms of certain recent business combinations in the chemicals industry and in other industries; and performed such other studies and analyses, and considered such other factors, as it deemed appropriate.
For purposes of rendering this opinion, Goldman Sachs, with Grace’s consent, relied upon and assumed the accuracy and completeness of all of the financial, legal, regulatory, tax, accounting and other information provided to, discussed with or reviewed by, it, without assuming any responsibility for independent verification thereof. In that regard, Goldman Sachs assumed with Grace’s consent that the Management Projections (as defined in the section of this proxy statement captioned “—Management Projections”) were reasonably prepared on a basis reflecting the best currently available estimates and judgments of the management of Grace. Goldman Sachs did not make an independent evaluation or appraisal of the assets and liabilities (including any contingent, derivative or other off-balance-sheet assets and liabilities) of Grace or any of its subsidiaries and Goldman Sachs was not furnished with any such evaluation or appraisal. Goldman Sachs assumed that all governmental, regulatory or other consents and approvals necessary for the consummation of the Merger will be obtained without any adverse effect on the expected benefits of the Merger in any way meaningful to its analysis. Goldman Sachs has also assumed that the Merger will be consummated on the terms set forth in the Merger Agreement, without the waiver or modification of any term or condition the effect of which would be in any way meaningful to its analysis.
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Goldman Sachs’ opinion does not address the underlying business decision of Grace to engage in the Merger or the relative merits of the Merger as compared to any strategic alternatives that may be available to Grace, nor does it address any legal, regulatory, tax or accounting matters. Goldman Sachs’ opinion addresses only the fairness from a financial point of view to the holders (other than Parent and its affiliates) of Grace common stock, as of the date of the opinion, of the Merger Consideration to be paid to such holders pursuant to the Merger Agreement. Goldman Sachs’ opinion does not express any view on, and does not address, any other term or aspect of the Merger Agreement or the Merger or any term or aspect of any other agreement or instrument contemplated by the Merger Agreement or entered into or amended in connection with the Merger, including the fairness of the Merger to, or any consideration received in connection therewith by, the holders of any other class of securities, creditors, or other constituencies of Grace, nor as to the fairness of the amount or nature of any compensation to be paid or payable to any of the officers, directors or employees of Grace, or class of such persons in connection with the transaction, whether relative to the Merger Consideration to be paid to the holders (other than Parent and its affiliates) of Grace common stock pursuant to the Merger Agreement or otherwise. Goldman Sachs’ opinion was necessarily based on economic, monetary, market and other conditions as in effect on, and the information made available to it as of, the date of the opinion, and Goldman Sachs assumed no responsibility for updating, revising or reaffirming its opinion based on circumstances, developments or events occurring after the date of its opinion. In addition, Goldman Sachs does not express any opinion as to the prices at which shares of Grace common stock trade at any time, as to the potential effects of volatility in the credit, financial and stock markets on Grace, Parent or the Merger, or as to the impact of the Merger on the solvency or viability of Grace or Parent or the ability of Grace or Parent to pay their respective obligations when they come due. Goldman Sachs’ opinion was approved by a fairness committee of Goldman Sachs.
The following is a summary of the material financial analyses delivered by Goldman Sachs to the Board of Directors in connection with rendering the opinion described above. The following summary, however, does not purport to be a complete description of the financial analyses performed by Goldman Sachs, nor does the order of analyses described represent relative importance or weight given to those analyses by Goldman Sachs. Some of the summaries of the financial analyses include information presented in tabular format. The tables must be read together with the full text of each summary and are alone not a complete description of Goldman Sachs’ financial analyses. Except as otherwise noted, the following quantitative information, to the extent that it is based on market data, is based on market data as it existed on or before April 23, 2021, the last trading day before the public announcement of the Merger, and is not necessarily indicative of current market conditions.
Historical Stock Trading Analysis. Goldman Sachs analyzed the $70.00 in cash per share to be paid to holders of Grace common stock (other than Excluded Shares) pursuant to the Merger Agreement in relation to:
the closing price per share of Grace common stock on April 23, 2021;
the closing price per share of Grace common stock on March 31, 2021, the last trading day before the public announcement of the proposal by 40 North to acquire Grace at $70.00 in cash per share of Grace common stock;
the volume weighted average price per share (“VWAP”) of Grace common stock over the 20-day trading period ended March 31, 2021;
the VWAP of Grace common stock over the 30-day trading period ended March 31, 2021;
the VWAP of Grace common stock after November 6, 2020, the last trading day before the first public announcement of a proposal by 40 North to acquire Grace, through April 23, 2021;
the closing price per share of Grace common stock on November 6, 2020;
the highest closing price per share of Grace common stock during the 52-week period ended April 23, 2021; and
the highest closing price per share of Grace common stock during the 52-week period ended November 6, 2020.
In addition Goldman Sachs calculated the average stock price performance for the following selected companies (i) after November 6, 2020 through April 23, 2021 and (ii) after October 13, 2020, the last trading day before Kathleen Reiland, the director on the Board of Directors employed and designated by 40 North, announced her resignation from the Board of Directors, through April 23, 2021, and then applied these average
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performances to the closing price per share of Grace common stock on November 6, 2020 and October 13, 2020, respectively, to derive what are referred to in this proxy statement, for November 6, 2020 or October 13, 2020, as the case may be, as the “hypothetical undisturbed stock price” from such date. The selected companies used in this calculation were:
Umicore;
Clariant;
Johnson Matthey;
PQ Group;
PPG;
Ashland;
Avient; and
NewMarket
Although none of these selected companies is directly comparable to Grace, the companies included were chosen because they are publicly traded companies with operations that for purposes of analysis may be considered similar to certain operations of Grace.
This analysis indicated that the $70.00 in cash per share to be paid to the holders of Grace common stock pursuant to the Merger Agreement represented:
a premium of 9.0% based on the closing price per share of the Grace common stock on April 23, 2021 of $64.24;
a premium of 16.9% based on the closing price per share of the Grace common stock on March 31, 2021 of $59.86;
a premium of 17.3% based on the VWAP of the Grace common stock over the 20-day trading period ended March 31, 2021 of $59.69;
a premium of 17.0% based on the VWAP of the Grace common stock over the 30-day trading period ended March 31, 2021 of $59.82;
a premium of 19.2% based on the VWAP of the Grace common stock after November 6, 2020 through April 23, 2021 of $58.71;
a premium of 58.9% based on the closing price per share on November 6, 2020 of $44.05;
a premium of 7.4% based on the highest closing price per share of Grace common stock during the 52-week period ended April 23, 2021 of $65.17;
a discount of 4.6% based on the highest closing price per share of Grace common stock during the 52-week period ended November 6, 2020 of $73.36;
a premium of 19.1% based on the hypothetical undisturbed stock price from November 6, 2020 of $58.77; and
a premium of 31.6% based on the hypothetical undisturbed stock price from October 13, 2020 of $53.21.
Illustrative Discounted Cash Flow Analysis. Using the Management Projections, Goldman Sachs performed an illustrative discounted cash flow analysis on Grace. Using discount rates ranging from 8.0% to 9.0%, reflecting estimates of Grace’s financial statements;
weighted average cost of capital, Goldman Sachs discounted to present value as of December 31, 2020 (i) estimates of unlevered free cash flow for Grace for the years 2021 through 2025 derived from the Management Projections and (ii) a range of illustrative terminal values for Grace, which were calculated by applying exit terminal year multiples ranging from 9.5x to 11.5x, to an estimate of Grace’s compliance with legalearnings before interest, taxes, depreciation and regulatory requirements;
amortization (“EBITDA”) for the qualifications and independenceterminal year, as reflected in the Management Projections (which analysis implied a perpetuity growth rate ranging from 2.0% to 3.9%). Goldman Sachs derived such discount rates by application of the Capital Asset Pricing Model, which requires certain
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company-specific inputs, including Grace’s target capital structure weightings, the cost of long-term debt, after-tax yield on permanent excess cash, if any, future applicable marginal cash tax rate and a beta for Grace, as well as certain financial metrics for the United States financial markets generally. The illustrative terminal value to EBITDA multiple range was derived by Goldman Sachs using its professional judgment and taking into account, among other things, the Management Projections and EBITDA multiples implied by the historical trading prices of the Grace common stock. Goldman Sachs derived ranges of illustrative enterprise values for Grace by adding the ranges of present values it derived above. Goldman Sachs then subtracted, from the range of illustrative enterprise values it derived for Grace, the net debt of Grace, as of December 31, 2020 and adjusted to give effect on a pro forma basis to the pending acquisition by Grace of the FCS business announced in February 2021, as provided by the management of Grace, to derive a range of illustrative equity values for Grace. Goldman Sachs then determined the net present value of tax attributes of Grace, as reflected in the Management Projections and excluded from the foregoing calculations, by applying a discount rate of 8.5%, representing the midpoint of the range of discount rates described above, to the value of these tax attributes and added these tax attributes to the range of illustrative equity values of Grace to derive a range of illustrative equity values that included an illustrative value for the tax attributes. Goldman Sachs then divided the range of illustrative equity values it derived including the tax attributes and excluding the tax attributes, respectively, by the number of fully diluted outstanding shares of Grace, as provided by the management of Grace, to derive a range of illustrative present values per share (including the tax attributes) ranging from $69.20 to $89.70 and a range of illustrative present values per share (excluding the tax attributes) ranging from $61.62 to $82.21.
Illustrative Present Value of Future Share Price Analysis. Goldman Sachs performed an illustrative analysis of the implied present value of an illustrative future value per share of Grace common stock, which is designed to provide an indication of the present value of a theoretical future value of a company’s equity as a function of such company’s financial multiples. For this analysis, Goldman Sachs used the Management Projections for each of the fiscal years 2022 through 2025. Goldman Sachs first calculated the implied enterprise value (“EV”) of Grace as of December 31 for each of the fiscal years 2021 to 2024, by multiplying the one-year forward EBITDA (“NTM EBITDA”) as of such date by an illustrative range of multiples of 9.0x to 11.0x. These illustrative multiple estimates were derived by Goldman Sachs utilizing its professional judgment and experience, taking into account current and historical trading data and EV/NTM EBITDA multiples for Grace. To derive illustrative implied equity values per share of Grace common stock, Goldman Sachs then subtracted the amount of Grace’s projected net debt as of December 31 for each of the fiscal years 2021 to 2024, as provided by the management of Grace, to determine implied equity values per share of Grace common stock as of December 31 for each of the fiscal years 2021 to 2024. Goldman Sachs then discounted these implied equity values per share to December 31, 2020 using a discount rate of 10.13%, reflecting an estimate of Grace’s cost of equity. Goldman Sachs derived such discount rate by application of the Capital Asset Pricing Model, which requires certain company-specific inputs, including a beta for Grace, as well as certain financial metrics for the United States financial markets generally. Goldman Sachs then added to such implied present values the aggregate dividends per share of Grace common stock estimated to be paid by Grace for each of the fiscal years 2021 to 2014 in the Management Projections, and as discounted to December 31, 2020 using a discount rate of 10.13%, reflecting an estimate of Grace’s cost of equity. These analyses resulted in a range of implied present values of $58.17 to $87.08 per share of Grace common stock.
Selected Transactions Analysis. Goldman Sachs analyzed certain publicly available information relating to the following selected transactions in the chemicals industry since 2015:
| | Date | | | Acquirer | | | Target | |
| | March 2021 | | | Cerberus / Koch | | | PQ’s Performance Chemicals Business | |
| | February 2021 | | | Grace | | | Albemarle’s Fine Chemistry Services Business | |
| | February 2021 | | | Bain Capital / Cinven | | | Lonza Specialty Ingredients | |
| | October 2020 | | | Ardian | | | Angus Chemical Company | |
| | December 2019 | | | Lone Star | | | BASF Construction Chemicals | |
| | December 2019 | | | Avient | | | Clariant Masterbatches | |
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| | Date | | | Acquirer | | | Target | |
| | April 2019 | | | Merck | | | Versum | |
| | April 2019 | | | Parker-Hannifin | | | LORD | |
| | April 2019 | | | Nippon | | | Dulux | |
| | January 2019 | | | Sika | | | Parex | |
| | August 2018 | | | Cabot Microelectronics | | | KMG Chemicals | |
| | July 2018 | | | Messer / CVC | | | Linde North America | |
| | March 2018 | | | Carlyle | | | Specialty Chemicals Business of Akzo Nobel | |
| | December 2017 | | | Grace | | | Albemarle Polyolefin Catalysts | |
| | September 2017 | | | Kuraray | | | Calgon Carbon | |
| | September 2017 | | | H.B. Fuller | | | Royal Adhesives | |
| | April 2017 | | | Houghton | | | Quaker | |
| | March 2017 | | | Henkel | | | Darex | |
| | October 2016 | | | Carlyle | | | Atotech | |
| | June 2016 | | | BASF | | | Chemetall | |
| | May 2016 | | | Evonik | | | Air Products Performance Materials | |
| | March 2016 | | | Sherwin-Williams | | | Valspar Corp | |
| | November 2015 | | | Air Liquide SA | | | Airgas | |
| | July 2015 | | | Platform Specialty | | | Alent plc | |
| | July 2015 | | | Solvay | | | Cytec Industries | |
| | June 2015 | | | Apollo Global Management, LLC | | | OM Group, Inc. | |
| | February 2015 | | | Tronox Limited | | | FMC Corp’s Alkali Chemicals Business | |
While none of the companies that participated in the selected transactions are directly comparable to Grace, the target companies in the selected transactions are companies with operations that, for the purposes of analysis, may be considered similar to certain of Grace’s results, market size and product profile. For each of the selected transactions, Goldman Sachs calculated the implied enterprise value of the applicable target company based on the consideration paid in the applicable transaction, as a multiple of the estimated EBITDA of the target company for the last 12-month period ended prior to announcement of each applicable transaction (“LTM EBITDA”), as disclosed in public company filings and other publicly available information.
The following table presents the results of this analysis:
| | | Selected Transactions | | | Proposed Transaction | |||||||
| | | Range | | | Median | | | Mean | | |||
EV / LTM EBITDA | | | 9.2x – 16.5x | | | 13.1x | | | 13.0x | | | 14.0x |
Goldman Sachs then applied a range of multiples of 9.2x to 16.5x, derived from this analysis, to the estimated 2021 EBITDA for Grace, as reflected in the Management Projections, to derive an illustrative range of enterprise values for Grace. Goldman Sachs then subtracted, from the range of illustrative enterprise values it derived for Grace, the net debt of Grace, as of December 31, 2020 and adjusted to give effect on a pro forma basis to the pending acquisition by Grace of the FCS business announced in February 2021, as provided by the management of Grace, to derive a range of illustrative equity values for Grace. Goldman Sachs then divided the range of illustrative equity values it derived by the number of fully diluted outstanding shares of Grace, as provided by the management of Grace, to derive a range of illustrative values per share ranging from $48.66 to $114.22.
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Premia Analysis. Goldman Sachs reviewed and analyzed, using publicly available information, the acquisition premia for all-cash acquisition transactions announced during the time period from 2016 through April 23, 2021 involving a public company based in the United States as the target where the disclosed enterprise values for the transaction were between $5.0 billion and $10 billion. For the entire period, using publicly available information, Goldman Sachs calculated the median, 25th percentile and 75th percentile premiums of the price paid in the transactions relative to the target’s stock price four weeks prior to the announcement of the transaction. This analysis indicated a median premium of 34.1% across the period. This analysis also indicated a 25th percentile premium of 20.8% and 75th percentile premium of 41.4% across the period. Using this analysis, Goldman Sachs applied a reference range of illustrative premiums of 20.8% to 41.4% to the undisturbed closing price per share of Grace common stock of $44.05 as of November 6, 2020 (the last trading day before the first public announcement of a proposal by 40 North to acquire Grace) and calculated a range of implied equity values per share of Grace common stock of $53.21 to $62.29. In addition, Goldman Sachs applied a reference range of illustrative premiums of 20.8% to 41.4% to the hypothetical undisturbed stock price from November 6, 2020 of $58.77 and calculated a range of implied equity values per share of Grace common stock of $70.99 to $83.10.
The preparation of a fairness opinion is a complex process and is not necessarily susceptible to partial analysis or summary description. Selecting portions of the analyses or of the summary set forth above, without considering the analyses as a whole, could create an incomplete view of the processes underlying Goldman Sachs’ opinion. In arriving at its fairness determination, Goldman Sachs considered the results of all of its analyses and did not attribute any particular weight to any factor or analysis considered by it. Rather, Goldman Sachs made its determination as to fairness on the basis of its experience and professional judgment after considering the results of all of its analyses. No company or transaction used in the above analyses as a comparison is directly comparable to Grace or Parent or the contemplated transaction.
Goldman Sachs prepared these analyses for purposes of Goldman Sachs’ providing its opinion to the Board of Directors as to the fairness from a financial point of view of the Merger Consideration to be paid to the holders (other than Parent and its affiliates) of Grace common stock pursuant to the Merger Agreement. These analyses do not purport to be appraisals nor do they necessarily reflect the prices at which businesses or securities actually may be sold. Analyses based upon forecasts of future results are not necessarily indicative of actual future results, which may be significantly more or less favorable than suggested by these analyses. Because these analyses are inherently subject to uncertainty, being based upon numerous factors or events beyond the control of the parties or their respective advisors, none of Grace, Parent, Goldman Sachs or any other person assumes responsibility if future results are materially different from those forecast.
The Merger Consideration was determined through arm’s-length negotiations between Grace and Parent and was approved by the Board of Directors. Goldman Sachs provided advice to Grace during these negotiations. Goldman Sachs did not, however, recommend any specific amount of consideration to Grace or the Board of Directors or that any specific amount of consideration constituted the only appropriate consideration for the Merger.
As described above, Goldman Sachs’ opinion to the Board of Directors was one of many factors taken into consideration by the Board of Directors in making its determination to approve the Merger Agreement. The foregoing summary does not purport to be a complete description of the analyses performed by Goldman Sachs in connection with the fairness opinion and is qualified in its entirety by reference to the written opinion of Goldman Sachs attached as Annex B to this proxy statement.
Goldman Sachs and its affiliates are engaged in advisory, underwriting and financing, principal investing, sales and trading, research, investment management and other financial and non-financial activities and services for various persons and entities. Goldman Sachs and its affiliates and employees, and funds or other entities they manage or in which they invest or have other economic interests or with which they co-invest, may at any time purchase, sell, hold or vote long or short positions and investments in securities, derivatives, loans, commodities, currencies, credit default swaps and other financial instruments of Grace, Parent, any of their respective affiliates and third parties, including 40 North, and its respective affiliates and portfolio companies, or any currency or commodity that may be involved in the Merger. Goldman Sachs acted as financial advisor to Grace in connection with, and participated in certain of the negotiations leading to, the Merger. Goldman Sachs has provided certain financial advisory and/or underwriting services to Grace and/or its affiliates from time to time for which the Investment Banking Division of Goldman Sachs has received, and may receive, compensation, including having
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acted as bookrunner with respect to Grace’s 4.875% Senior Notes due 2027 (aggregate principal amount $750,000,000) in June 2020, Grace’s financial advisor in connection with Grace’s agreement to acquire the FCS business from Albemarle Corporation in February 2021 and as sole arranger with respect to Grace’s Senior Secured Term Loan B-3 due March 2028 (aggregate principal amount $300,000,000) in March 2021. During the two year period ended April 26, 2021, Goldman Sachs has recognized compensation for financial advisory and/or underwriting services provided by its Investment Banking Division to Grace and/or its affiliates of approximately $1,000,000. Goldman Sachs may also in the future provide financial advisory and/or underwriting services to Grace, Parent and 40 North and their respective affiliates and, as applicable, portfolio companies for which the Investment Banking Division of Goldman Sachs may receive compensation. Affiliates of Goldman Sachs also may have co-invested with 40 North and its affiliates from time to time and may have invested in limited partnership units of affiliates of 40 North from time to time and may do so in the future.
The Board of Directors selected Goldman Sachs as its financial advisor because it is an internationally recognized investment banking firm that has substantial experience in transactions similar to the Merger. Pursuant to a letter agreement dated March 22, 2021, Grace engaged Goldman Sachs to act as its financial advisor in connection with the Merger. Pursuant to this engagement letter, Grace has agreed to pay Goldman Sachs a $5,000,000 quarterly fee for financial advisory services from and after the fourth quarter of 2020 of up to an aggregate of $25,000,000 (the “Financial Advisory Fee”). This engagement letter also provides for a transaction fee, based on the information available as of the date of announcement of the Merger, of approximately $48,700,000, all of which is contingent upon consummation of the Merger (the “Transaction Fee”). Any Financial Advisory Fee that Grace has already paid to Goldman Sachs will reduce the subsequent Transaction Fee. No Financial Advisory Fee will be due to Goldman Sachs after the payment of the Transaction Fee. In addition, Grace has agreed to reimburse Goldman Sachs for certain of its expenses, including attorneys’ fees and disbursements, and to indemnify Goldman Sachs and related persons against various liabilities, including certain liabilities under the federal securities laws.
At a meeting of the Board of Directors held on April 25, 2021 to evaluate and approve the Merger, Moelis rendered its oral opinion to the Board of Directors, confirmed by the delivery of a written opinion dated April 26, 2021, addressed to the Board of Directors to the effect that, as of the date of such opinion and based upon and subject to the assumptions made, procedures followed, matters considered and limitations on the review undertaken, the Merger Consideration to be received in the Merger by the holders of the Grace common stock (other than the Supporting Stockholder, Parent, Merger Sub, any other subsidiary of Parent, Grace or any wholly owned subsidiary of Grace) was fair, from a financial point of view, to such holders.
The full text of Moelis’ written opinion dated April 26, 2021, which sets forth the assumptions made, procedures followed, matters considered and limitations on the review undertaken in connection with the opinion, is attached as Annex C to this proxy statement and is incorporated herein by reference. Moelis’ opinion was provided for the use and benefit of the Board of Directors (solely in its capacity as such) in its evaluation of the Merger. Moelis’ opinion is limited solely to the fairness, from a financial point of view, of the Merger Consideration to be received by the holders of the Grace common stock (other than the Supporting Stockholder, Parent, Merger Sub, any other subsidiary of Parent, Grace or any wholly owned subsidiary of Grace) in the Merger and does not address Grace’s underlying business decision to effect the Merger or the relative merits of the Merger as compared to any alternative business strategies or transactions that might be available to Grace. Moelis’ opinion does not constitute a recommendation as to how any holder of securities should vote or act with respect to the Merger or any other matter. Moelis’ opinion was approved by a Moelis fairness opinion committee.
In arriving at its opinion, Moelis, among other things:
reviewed certain publicly available business and financial information relating to Grace;
reviewed certain internal information relating to the business, earnings, cash flow, assets, liabilities and prospects of Grace furnished to Moelis by Grace, including financial forecasts provided to or discussed with Moelis by the management of Grace (as described in the section of this proxy statement captioned “—Management Projections”);
reviewed information relating to the capitalization (including incentive equity) of Grace furnished to Moelis by Grace;
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conducted discussions with members of the senior management and representatives of Grace concerning the information described in the foregoing three items in this paragraph, as well as the business and prospects of Grace generally;
reviewed publicly available financial and stock market data of certain other companies in lines of business that Moelis deemed relevant;
reviewed the financial terms of certain other transactions that Moelis deemed relevant;
reviewed an execution version of each of (i) the Merger Agreement, (ii) the Debt Commitment Letter, (iii) the Equity Commitment Letter, (iv) the Guaranty, (v) the Voting Agreement and (vi) the debt commitment letter among JPMorgan Chase Bank, N.A., BNP Paribas Securities Corp., Citigroup Global Markets Inc., Deutsche Bank Securities Inc. and Standard Industries;
participated in certain discussions and negotiations among representatives of Grace and Parent and their advisors; and
conducted such other financial studies and analyses and took into account such other information as Moelis deemed appropriate.
In connection with its review, with the consent of the Board of Directors, Moelis relied on the information supplied to, discussed with or reviewed by it for purposes of its opinion being complete and accurate in all material respects. Moelis did not assume any responsibility for independent auditors;
verification of, and did not independently verify, any of such information. With the consent of the Board of Directors, Moelis relied upon, without independent verification, the assessment of Grace and its legal, tax, regulatory and accounting advisors with respect to legal, tax, regulatory and accounting matters. With respect to the Management Projections (as defined in the section of this proxy statement captioned “—Management Projections”), Moelis assumed, at the direction of the Board of Directors, that they were reasonably prepared on a basis reflecting the best currently available estimates and judgments of Grace’s management as to the future performance of Grace. Moelis expressed no views as to the reasonableness of the Management Projections and other financial forecasts or the assumptions on which they were based. In addition, with the consent of the Board of Directors, Moelis did not make any independent evaluation or appraisal of any of the assets or liabilities (contingent, derivative, off-balance-sheet, or otherwise) of Grace, nor was Moelis furnished with any such evaluation or appraisal.
Moelis’ opinion did not address Grace’s underlying business decision to effect the Merger or the relative merits of the Merger as compared to any alternative business strategies or transactions that might be available to Grace and did not address any legal, regulatory, tax or accounting matters. At the direction of the Board of Directors, Moelis was not asked to, nor did it, offer any opinion as to any terms of the Merger Agreement or any aspect or implication of the Merger, except for the fairness of the Merger Consideration from a financial point of view to the holders of the Grace common stock (other than the Supporting Stockholder, Parent, Merger Sub, any other subsidiary of Parent, Grace or any wholly owned subsidiary of Grace). Moelis did not express any opinion as to fair value or the solvency of Grace following the closing of the Merger. In addition, Moelis noted that, pursuant to the Merger Agreement, the Excluded Shares will not be converted into the right to receive the Merger Consideration, and Moelis expressed no opinion with respect to such shares or as to the fairness of the Merger Consideration to holders thereof. In rendering its opinion, Moelis assumed, with the consent of the Board of Directors, that the final executed form of the Merger Agreement would not differ in any material respect from the draft that Moelis reviewed, that the Merger would be consummated in accordance with its terms without any waiver or modification that could be material to Moelis’ analysis, and that the parties to the Merger Agreement would comply with all the material terms of the Merger Agreement. Moelis assumed, with the consent of the Board of Directors, that all governmental, regulatory or other consents or approvals necessary for the completion of the Merger would be obtained, except to the extent that could not be material to Moelis’ analysis.
Moelis’ opinion was necessarily based on economic, monetary, market and other conditions as in effect on, and the information made available to Moelis as of, the date of its opinion, and Moelis assumed no responsibility to update its opinion for developments after the date of its opinion.
Moelis’ opinion did not address the fairness of the Merger or any aspect or implication of the Merger to, or any other consideration of or relating to, the holders of any class of securities, creditors or other constituencies of Grace, other than the fairness of the Merger Consideration from a financial point of view to the holders of the Grace common stock (other than the Supporting Stockholder, Parent, Merger Sub, any other subsidiary of Parent,
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Grace or any wholly owned subsidiary of Grace). In addition, Moelis did not express any opinion as to the fairness of the amount or nature of any compensation to be received by any officers, directors or employees of any parties to the Merger, or any class of such persons, relative to the Merger Consideration or otherwise. Moelis’ opinion was approved by a Moelis fairness opinion committee.
Summary of Financial Analyses
The following is a summary of the material financial analyses prepared by Moelis for the Board of Directors in connection with rendering its written opinion. Some of the summaries of financial analyses below include information presented in tabular format. In order to fully understand Moelis’ analyses, the tables must be read together with the text of each summary. The tables alone do not constitute a complete description of the analyses. Considering the data described below without considering the full narrative description of the financial analyses, including the methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of Moelis’ analyses.
Unless the context indicates otherwise, stock prices (i) with respect to Grace, are based on the closing stock price of Grace common stock on April 23, 2021 and March 31, 2021 (which Moelis deemed to be the unaffected trading date for purposes of its analyses) and (ii) with respect to other companies, are also based on closing stock prices on April 23, 2021. For purposes of, among other things, deriving per share implied equity values for Grace, Moelis calculated certain per share amounts for Grace based on diluted shares outstanding as of April 22, 2021 provided by Grace management and approved for use by Moelis in rendering its opinion. For purposes of Moelis’ analyses, Moelis also used Grace management’s projected December 31, 2020 balance sheet, as set forth in the Management Projections and provided as of January 27, 2021, which management confirmed on April 24, 2021 was unchanged.
For purposes of its analyses, Moelis reviewed a number of financial metrics, including the following:
Adjusted EBITDA: generally calculated as the relevant company’s earnings before interest, taxes, depreciation and amortization, as adjusted to exclude one-time charges and benefits and to reflect the full-year impact of material corporate transactions.
Enterprise Value (or EV): which (i) with respect to Grace, was calculated as the market value of Grace’s fully diluted common equity based on its closing stock prices on April 23, 2021 and March 31, 2021 (which Moelis deemed to be the unaffected trading date for purposes of its analyses) and share count information as of April 22, 2021 provided by Grace management and approved by Grace management for use by Moelis in rendering its opinion, plus (a) preferred stock, plus (b) debt, less (c) cash and cash equivalents, less (d) unconsolidated assets and plus (e) book value of non-controlling interests (in each of the foregoing clauses (a) through (e), as projected by Grace management as of December 31, 2020 and provided as of January 27, 2021, which management confirmed on April 24, 2021 was unchanged), and (ii) with respect to other companies, was calculated as the market value of the relevant company’s fully diluted common equity based on its closing stock price as of April 23, 2021, plus (a) preferred stock, plus (b) debt, less (c) cash and cash equivalents, less (d) unconsolidated assets and plus (e) book value of non-controlling interests (in each of the foregoing clauses (a) through (e), as of the relevant company’s most recently reported quarter end).
Unless the context indicates otherwise, (i) the estimates of the future financial performance for the selected publicly traded companies listed below were based on certain publicly available research analyst estimates for those companies, and (ii) the estimates of the future financial performance of Grace relied upon for the financial analyses described below were based on the Management Projections.
Selected Publicly Traded Companies Analysis
Moelis reviewed financial and stock market information of the selected publicly traded companies noted below that manufacture specialty chemicals and catalysts on a global basis serving a broad range of transportation, industrial and consumer applications and other specialty chemical companies with similar growth trajectory, financial profile and technological expertise and deemed generally relevant by Moelis in certain respects to Grace. Moelis excluded companies that primarily manufacture commodity chemicals due to the significant differences in business models, go-to-market strategies, competitive dynamics and margin profile compared to Grace.
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Moelis reviewed, among other things, the EV of the selected publicly traded companies as a multiple of estimated Adjusted EBITDA for calendar year 2021 and estimated Adjusted EBITDA for calendar year 2022. Financial data for the selected publicly traded companies were based on publicly available median consensus research analyst estimates and public filings. In the case of estimated Adjusted EBITDA for Grace, Moelis reviewed both median consensus research analyst estimates and the Management Projections.
The selected publicly traded companies used in this analysis and their implied trading values to estimated Adjusted EBITDA for calendar year 2021 and estimated Adjusted EBITDA for calendar year 2022 multiples are summarized in the following table:
| | | Market Cap ($ in millions) | | | EV ($ in millions) | | | EV / Adj. EBITDA 2021E | | | EV / Adj. EBITDA 2022E | |
Specialty Chemical Companies | | | | | | | | | ||||
Air Products & Chemicals, Inc. | | | $64,687 | | | $66,883 | | | 16.5x | | | 14.9x |
Albemarle Corporation | | | $18,947 | | | $20,673 | | | 24.8x | | | 19.3x |
Ashland Global Holdings Inc. | | | $5,718 | | | $7,898 | | | 12.9x | | | 11.8x |
Celanese Corporation | | | $18,091 | | | $20,695 | | | 10.8x | | | 10.5x |
DuPont de Nemours, Inc. | | | $41,641 | | | $55,670 | | | 14.2x | | | 13.3x |
Element Solutions Inc. | | | $5,145 | | | $6,367 | | | 13.9x | | | 13.0x |
Hexcel Corporation | | | $4,848 | | | $5,678 | | | 28.8x | | | 17.3x |
Mean | | | | | | | 17.4x | | | 14.3x | ||
Median | | | | | | | 14.2x | | | 13.3x | ||
Catalyst Companies (For Reference Only) | | | | | | | | | ||||
Albemarle Corporation | | | $18,947 | | | $20,673 | | | 24.8x | | | 19.3x |
Umicore SA | | | $14,579 | | | $16,363 | | | 13.7x | | | 13.1x |
Johnson Matthey Plc. | | | $8,796 | | | $9,967 | | | 9.7x | | | 8.9x |
Clariant AG | | | $7,318 | | | $8,377 | | | 11.6x | | | 10.6x |
PQ Group Holdings Inc. | | | $2,343 | | | $2,712 | | | 12.1x | | | 10.6x |
Mean | | | | | | | 14.4x | | | 12.5x | ||
Median | | | | | | | 12.1x | | | 10.6x | ||
| | | | | | | | | |||||
Grace Consensus (Current – as of 04/23/21) | | | $4,299 | | | $5,987 | | | 11.3x | | | 10.1x |
Grace Consensus (Unaffected – as of 03/31/21) | | | $4,002 | | | $5,689 | | | 10.7x | | | 9.7x |
Grace Management Projections (Current – as of 04/23/21) | | | $4,299 | | | $6,572 | | | 11.4x | | | 9.4x |
Grace Management Projections (Unaffected – as of 03/31/21) | | | $4,002 | | | $6,274 | | | 10.9x | | | 8.9x |
In reviewing the characteristics of the selected publicly traded companies for purposes of selecting its reference ranges to apply to Grace’s estimated financial metrics, Moelis noted that the low-end of its reference ranges was informed by Grace’s unaffected trading metrics. Since the three public proposals by 40 North to acquire Grace, Grace had experienced significant share price outperformance relative to the selected publicly traded companies. Moelis deemed the unaffected trading date for these purposes to be March 31, 2021, which was one day prior to 40 North’s “best and final” $70.00 per share cash offer made publicly. Moelis also noted that the high-end of its reference ranges was informed by Ashland Global Holdings Inc., DuPont de Nemours, Inc., and Element Solutions Inc., considering their similar growth trajectory, margin profile, and technological expertise. While considered, Moelis did not utilize data for Air Products & Chemicals, Inc. and Albemarle Corporation in its reference ranges because Moelis assessed that those companies have a different customer mix than Grace. Moelis also did not utilize data for Celanese Corporation in its reference ranges because Moelis assessed that Celanese’s overall portfolio of business assets contains less specialty chemical assets than Grace. Finally, Moelis did not utilize data for Hexcel Corporation in its reference ranges because Moelis assessed that Hexcel’s EBITDA estimates are depressed given Hexcel’s exposure to aerospace and defense, which has been disproportionally impacted by COVID-19. The other catalyst manufacturers were included for reference only and not utilized by Moelis for purposes of selecting the reference range due to the limited relative revenue contribution of the catalyst segments to the aggregate product portfolio of the companies.
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Based on the foregoing analysis and its professional judgment and experience, Moelis selected reference ranges of 10.5x to 12.5x estimated pro forma Adjusted EBITDA for calendar year 2021 and 9.5x to 11.5x estimated Adjusted EBITDA for calendar year 2022. Moelis then applied these multiples to Grace’s estimated pro forma Adjusted EBITDA for calendar year 2021 and estimated Adjusted EBITDA for calendar year 2022, respectively, provided by Grace’s management. This analysis indicated an implied per share value ranges for the Grace common stock of $60.34 to $78.13 per share, and $65.72 to $86.43 per share, respectively. Moelis compared the implied per share value ranges to the Merger Consideration of $70.00 per share.
Selected Precedent Transactions Analysis
Moelis reviewed financial information for selected precedent transactions announced since 2013 with an EV of at least approximately $300 million involving companies that manufacture specialty chemicals and catalysts on a global basis serving a broad range of transportation, industrial and consumer applications and high value specialty chemical companies with similar financial profile, technology focus and customer exposure. Moelis reviewed, among other things, transaction values of the selected precedent transactions as a multiple of last 12 month (“LTM”) Adjusted EBITDA of the target company. Financial data for the relevant transactions were based on publicly available information relating to the relevant transaction.
The selected precedent transactions used in this analysis and their implied transaction value to LTM Adjusted EBITDA multiples are summarized in the following table:
Date Announced | | | Acquiror | | | Target | | | EV (in millions) | | | EV / LTM Adj. EBITDA |
March 2021 | | | DuPont De Nemours, Inc. | | | Laird PLC | | | $2,300 | | | 16.5x |
March 2021 | | | Cerberus Capital Management, L.P. and Koch Minerals & Trading, LLC | | | PQ Group Holdings Inc.’s Performance Chemicals business | | | $1,100 | | | 9.4x |
February 2021 | | | Bain Capital Private Equity & Cinven Group Ltd. | | | Lonza Specialty Ingredients | | | $4,671 | | | 13.0x |
October 2020 | | | Ardian SA and Ardian Holding SAS | | | Angus Chemical Company | | | $2,250 | | | 13.1x |
April 2019 | | | Merck KGaA | | | Versum Materials, Inc. | | | $6,499 | | | 14.3x |
August 2018 | | | Cabot Microelectronics Corporation | | | KMG Chemicals, Inc. | | | $1,566 | | | 13.2x |
March 2018 | | | Carlyle Group Inc. & GIC Pte. | | | Akzo Nobel N.V.’s Specialty Chemicals business | | | $12,524 | | | 9.8x |
December 2017 | | | W. R. Grace & Co. | | | Albemarle Corporation’s Polyolefin Catalysts business | | | $416 | | | 12.8x |
September 2017 | | | Kuraray Co., Ltd. | | | Calgon Carbon Corporation | | | $1,329 | | | 15.6x |
September 2017 | | | H.B. Fuller Company | | | Royal Adhesives & Sealants LLC | | | $1,575 | | | 11.4x |
December 2016 | | | Evonik Industries AG | | | J.M. Huber Corporation’s Silica business | | | $630 | | | 10.5x |
October 2016 | | | Carlyle Group Inc. | | | Atotech B.V. | | | $3,200 | | | 11.9x |
September 2016 | | | Lanxess AG | | | Chemtura Corporation | | | $2,563 | | | 9.5x |
June 2016 | | | BASF SE | | | Albemarle Corporation’s Chemetall Surface Treatment business | | | $3,200 | | | 15.3x |
May 2016 | | | Evonik Industries AG | | | Air Products & Chemicals, Inc.’s Performance Materials division | | | $3,800 | | | 15.8x |
November 2015 | | | Air Liquide S.A. | | | Airgas | | | $13,400 | | | 13.7x |
July 2015 | | | Solvay S.A. | | | Cytec Industries Incorporated. | | | $6,153 | | | 14.8x |
July 2015 | | | Platform Specialty Products Corporation | | | Alent plc | | | $2,254 | | | 13.1x |
June 2015 | | | Apollo Affiliated Funds | | | OM Group, Inc. | | | $1,100 | | | 11.4x |
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Date Announced | | | Acquiror | | | Target | | | EV (in millions) | | | EV / LTM Adj. EBITDA |
November 2014 | | | Golden Gate Capital | | | Angus Chemical Company | | | $1,200 | | | 11.2x |
September 2014 | | | Eastman Chemical Company | | | Taminco Corporation | | | $2,706 | | | 10.0x |
July 2014 | | | Albemarle Corporation | | | Rockwood Chemical Co. | | | $6,142 | | | 11.3x |
October 2013 | | | W. R. Grace & Co. | | | Dow Chemical Company’s Catalysts business | | | $500 | | | 11.1x |
October 2013 | | | Platform Specialty Products Corporation | | | MacDermid | | | $1,800 | | | 10.2x |
October 2013 | | | Solvay S.A. | | | Chemlogics Group | | | $1,345 | | | 10.8x |
June 2013 | | | Cinven Group Ltd. | | | CeramTec | | | $1,988 | | | 11.3x |
Mean | | | | | | | | | 12.4x | |||
Median | | | | | | | | | 11.7x |
In reviewing the characteristics of the selected precedent transactions for purposes of selecting its reference range to apply to Grace’s estimated financial metrics, Moelis noted that its reference range was informed by the mean and median of EV / LTM Adj. EBITDA multiples of selected precedent transactions after considering the selected precedent transactions at the high-end and low-end of the implied transaction multiples. Moelis also noted that its reference range was also informed by selected precedent transactions involving catalysts companies, including Grace’s acquisition of Albemarle Corporation’s Polyolefin Catalysts business at 12.8x EV / LTM Adjusted EBITDA and Grace’s acquisition of Dow Chemical Company’s Catalysts business at 11.1x EV / LTM Adjusted EBITDA. Moelis noted that these were smaller transactions in terms of EV and occurred during a meaningfully different market environment.
Based on the foregoing analysis and its professional judgment and experience, and given the nature of Grace’s operations, Moelis selected a reference range of 11.0x to 13.0x EV / LTM Adjusted EBITDA. Moelis then applied these multiples to Grace’s estimated pro forma Adjusted EBITDA for calendar year 2021 provided by Grace’s management. Moelis used Grace’s Adjusted EBITDA for calendar year 2021 to normalize for the effects of COVID-19 on Grace’s financial performance and included the estimated full-year run-rate impact of the FCS Acquisition. This analysis indicated an implied per share value range for the Grace common stock of $64.81 to $82.55 per share. Moelis compared the implied per share value range to the Merger Consideration of $70.00 per share.
For informational purposes only, Moelis then also applied these multiples to Grace’s estimated Adjusted EBITDA for calendar year 2021 provided by Grace’s management plus an estimated additional run-rate EBITDA of $50 million expected to result from increased capacity from recent capital investments that has not yet been fully realized due to COVID-19 and certain operating segment challenges. This analysis indicated an implied per share value range for the Grace common stock of $72.95 to $92.11 per share. Moelis did not utilize this analysis for purposes of its opinion given the uncertainty of projecting the timing of increased EBITDA resulting from the increased capacity in the current environment. In addition, given the lack of public information relating to adjustments for capital investments of target companies involved in the selected precedent transactions, Moelis noted that applying potential incremental EBITDA resulting from Grace’s increased capital investment to selected precedent information that may not have been adjusted in a consistent way could result in an implied per share value range that was not comparable for purposes of this analysis.
Discounted Cash Flow Analysis
Moelis performed a discounted cash flow analysis of Grace using the Management Projections and other information and data provided by Grace’s management to calculate the present value of the estimated future unlevered after-tax free cash flows projected to be generated by Grace and the present value of Grace’s estimated terminal value, taking into account the present value of Grace’s net operating losses and other tax credits. For purposes of the discounted cash flow analysis, Moelis calculated unlevered free cash flow as Adjusted EBITDA, less (i) taxes, (ii) capital expenditures, (iii) changes in net working capital, (iv) cash paid for environmental and other legacy liabilities and (v) other miscellaneous adjustments.
Moelis utilized a range of discount rates of 7.50% to 9.25% based on an estimated range of Grace’s weighted average cost of capital. The estimated weighted average cost of capital range reflected a cost of equity derived using the Capital Asset Pricing Model using (i) a risk-free rate based on 20-year U.S. government bonds,
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(ii) a selected range of unlevered betas and debt to total capitalization ratios informed by the selected publicly traded companies described above, (iii) an equity risk premium and (iv) a size premium based on publicly traded companies with similar equity values to Grace. Moelis used the foregoing range of discount rates to calculate the present values as of December 31, 2020 of (i) Grace’s estimated after-tax unlevered free cash flows for calendar years 2021 through 2025 (in each case, discounted using the mid-year discounting convention) and (ii) the estimated terminal values derived by applying a range of selected terminal multiples of 9.5x to 10.5x to Grace’s estimated terminal year Adjusted EBITDA.
For purposes of selecting the reference range to apply to Grace’s estimated terminal year Adjusted EBITDA, Moelis noted that the terminal multiple was informed most closely by (i) current and historical trading multiples for Grace, (ii) current and historical trading multiples for the selected publicly traded companies and (iii) headwinds in the refining industry, which are expected to drive multiple contraction over time. Based on the foregoing analysis and its professional judgment and experience, Moelis selected a multiple range of 9.5x to 10.5x estimated terminal year Adjusted EBITDA. Moelis then applied such multiple range to Grace’s estimated terminal year Adjusted EBITDA of $824 million provided by Grace’s management to calculate the estimated terminal values. Grace’s estimated terminal year Adjusted EBITDA reflects the impact of Grace’s management’s long-term, publicly disclosed view of expected lower demand for Grace’s FCC business within the Refining Technologies segment based on long-term secular trends in the refining industry.
In calculating the implied per share value ranges for the Grace common stock, Moelis separately valued Grace’s tax attributes including tax credits and net operating losses with the utilization based cash tax savings schedule for calendar years 2021 through 2030 provided by Grace’s management and using a cost of equity range of 8.5% to 12.5%.
Based on the foregoing, Moelis derived implied per share value ranges for the Grace common stock of $66.69 to $83.39. Moelis compared the implied per share value range to the Merger Consideration of $70.00 per share.
For informational purposes only, Moelis also performed a discounted cash flow analysis of Grace with a terminal year Adjusted EBITDA of $882 million based on Grace’s estimated Adjusted EBITDA for calendar year 2025, which was Grace’s terminal year projected Adjusted EBITDA prior to further adjustments by Grace to take into account the impact of the long-term secular trends in the refining industry on the FCC business within the Refining Technologies segment. This analysis indicated an implied per share value range for the Grace common stock of $71.93 to $89.62 per share. Moelis did not utilize this analysis for purposes of its opinion.
Subsequent to the April 25, 2021 presentation to the Board of Directors, Moelis discovered that in performing the foregoing discounted cash flow analysis, Moelis double counted $15.3 million of acquisition-related costs for the FCS Acquisition in Grace’s estimated future unlevered after-tax free cash flow calculation for 2021 and the projected December 31, 2020 balance sheet. Moelis recalculated Grace’s estimated future unlevered after-tax free cash flow for 2021 to remove the $15.3 million of these costs. This recalculation and the impact on the discounted cash flow analysis did not result in any change to Moelis’ ultimate fairness opinion. Moelis did, however, provide the Board of Directors with the revised discounted cash flow analysis, which indicated (i) an increase to the discounted cash flow analysis implied per share value range for the Grace common stock of approximately $0.22 per share, and (ii) an implied per share value range for the Grace common stock of $66.91 to $83.61 (as compared to $66.69 to $83.39 prior to the correction for the estimated future unlevered after-tax free cash flow for 2021). For informational purposes only, Moelis also recalculated its discounted cash flow analysis using the corrected estimated future unlevered after-tax free cash flow for 2021 and the terminal year Adjusted EBITDA of $882 million, which indicated an implied per share value range for the Grace common stock of $72.14 to $89.84 (as compared to $71.93 to $89.62 prior to the correction for the estimated future unlevered after-tax free cash flow for 2021).
Other Information
Moelis also noted for the Board of Directors the following additional factors that were not considered part of Moelis’ financial analyses with respect to its opinion, but were referenced for informational purposes: (i) an illustrative leverage buyout analysis for the Grace common stock that reviewed Grace using the Management Projections and other information and data provided by Grace’s management which, based on, among other things, a 6.0x leverage and a 15% to 25% internal audit functionrevenue rate of return, reflected a range of implied share prices of $48.51 to $65.58, (ii) the historical intraday trading prices for the Grace common stock during the 52-week period ended April 23, 2021, which reflected low and independent auditors;high stock prices during such period of $38.70 and $65.17 per share, (iii) the one-year forward stock price targets for the Grace common stock in recently
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published, publicly available equity research analysts’ reports, which indicated undiscounted low and high stock price targets ranging from $65.00 to $75.00 per share, and (iv) the one-year forward stock price targets for the Grace common stock in recently published, publicly available equity research analysts’ reports, which was discounted for one year and indicated low and high stock price targets ranging from $58.82 to $67.87 per share.
Miscellaneous
The foregoing summary of the analyses undertaken by Moelis is not a complete description of Moelis’ opinion or the analyses underlying, and factors considered in connection with, Moelis’ opinion. The preparation of a fairness opinion is a complex analytical process and is not necessarily susceptible to partial analysis or summary description. Selecting portions of the analyses or summary set forth above, without considering the analyses as a whole, could create an incomplete view of the processes underlying Moelis’ opinion. In arriving at its fairness determination, Moelis considered the results of all of its analyses and did not attribute any particular weight to any factor or analysis. Rather, Moelis made its fairness determination on the basis of its experience and professional judgment after considering the results of all of its analyses. No company or transaction used in the analyses described above is identical to Grace or the Merger. In addition, such analyses do not purport to be appraisals, nor do they necessarily reflect the prices at which businesses or securities actually may be sold. Analyses based upon forecasts of future results are not necessarily indicative of actual future results, which may be significantly more or less favorable than suggested by such analyses. Because the analyses described above are inherently subject to uncertainty, being based upon numerous factors or events beyond the control of the parties or their respective advisors, neither Grace nor Moelis or any other person assumes responsibility if future results are materially different from those forecast.
The Merger Consideration was determined through arm’s-length negotiations between Grace and Parent and was approved by the Board of Directors. Moelis did not recommend any specific consideration to Grace or the Board of Directors, or that any specific amount or type of consideration constituted the only appropriate consideration for the transaction. The Board of Directors selected Moelis as its financial advisor because it is an internationally recognized investment banking firm that has substantial experience in transactions similar to the Merger. Pursuant to a letter agreement dated April 12, 2021, Moelis acted as financial advisor to Grace in connection with the Merger and will receive a fee for its services, estimated to be approximately $28 million in the aggregate based on the information available as of the date of announcement of the Merger, $3 million of which was earned in connection with the delivery of Moelis’ opinion dated April 26, 2021, in connection with the Board of Directors’ consideration of the Merger, regardless of the conclusion reached therein, and the remainder of which is contingent upon completion of the Merger. Furthermore, Grace has agreed to reimburse Moelis for certain expenses and to indemnify Moelis for certain liabilities, including liabilities under the federal securities laws, arising out of its engagement.
Moelis’ affiliates, employees, officers and partners may at any time own securities (long or short) of Grace and Parent. In the past two years, Moelis has not provided investment banking or other services to Grace or Parent. Moelis may, in the future, provide investment banking or other services to Grace, Parent or other parties involved in the Merger and may receive compensation for such services. Mr. Shlomo Yanai, a member of the Board of Directors, serves as a senior advisor to Moelis. Mr. Yanai did not participate in the preparation of the internal control reportMoelis opinion described above or in the provision of financial advisory services by Moelis to the Board of Directors.
Summary of Management Projections
Except for a financial outlook with respect to the current fiscal quarter and year and, from time to time, certain future years, issued in connection with its ordinary course earnings announcements, Grace does not, as a matter of course, publicly disclose forecasts or projections as to future performance, earnings or other results due to the inherent unpredictability of the underlying assumptions, estimates and projections, especially over the longer term periods. However, Grace is including a summary of certain previously nonpublic, unaudited prospective financial information prepared by its management for the calendar years 2021-2025 (the “Management Projections”) in order to provide Grace Stockholders with access to information that was made available to, and approved by, the Board of Directors in connection with its evaluation of the Merger and the Merger Consideration. The Management Projections were also made available to Parent and Merger Sub at
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Parent’s request in connection with their due diligence review, and the Management Projections were made available to Goldman Sachs and Moelis in connection with the rendering of their respective opinions to the Board of Directors, as further described in the sections of this proxy statement captioned “—Opinion of Goldman Sachs & Co. LLC” and “—Opinion of Moelis & Company LLC.”
The following table presents a summary of the Management Projections. The Management Projections were developed by Grace management on a pro forma basis, giving effect to the proposed acquisition by Grace of the Fine Chemistry Services business of Albemarle Corporation for approximately $570 million, which was announced by Grace on February 26, 2021, prior to the date of the Merger Agreement, and which transaction is expected to close in the second quarter of 2021, subject to customary closing conditions (the “FCS Acquisition”). The Management Projections, however, do not give effect to the Merger and the other transactions contemplated by the Merger Agreement.
(in millions, except per share data) | | | 2021E | | | 2022E | | | 2023E | | | 2024E | | | 2025E |
Revenue | | | $2,039 | | | $2,288 | | | $2,405 | | | $2,525 | | | $2,648 |
Gross Margin | | | $812 | | | $941 | | | $1,004 | | | $1,058 | | | $1,111 |
Adjusted EBITDA(1) | | | $576 | | | $702 | | | $766 | | | $823 | | | $882 |
Adjusted EBIT(2) | | | $446 | | | $557 | | | $614 | | | $663 | | | $714 |
Marginal Tax Rate | | | 26.0% | | | 26.0% | | | 26.0% | | | 26.0% | | | 26.0% |
| | | | | | | | | | | ||||||
Selected Cash Flow Adjustments | | | | | | | | | | | |||||
Depreciation & Amortization | | | $131 | | | $145 | | | $152 | | | $160 | | | $168 |
Change in Net Working Capital | | | $(78) | | | $(28) | | | $(22) | | | $(24) | | | $(24) |
Capital Expenditures | | | $(173) | | | $(193) | | | $(210) | | | $(210) | | | $(200) |
Cash Paid for Environmental and Other Legacy Liabilities | | | $(41) | | | $(43) | | | $(48) | | | $(41) | | | $(15) |
Other Misc. Adjustments | | | $38 | | | $(3) | | | $(3) | | | $(1) | | | $(2) |
| (1) | “Adjusted EBITDA” is a non-GAAP financial measure which was calculated in the Management Projections as Adjusted EBIT adjusted for depreciation and amortization, and depreciation and amortization included in equity in earnings of unconsolidated affiliates. For purposes of the market-based financial multiples analysis performed by Goldman Sachs and Moelis, the Management Projections also included pro forma 2021E Adjusted EBITDA, giving effect to the FCS Acquisition as though it was completed prior to January 1, 2021, of $601 million. |
| (2) | “Adjusted EBIT” is a non-GAAP financial measure which was calculated in the Management Projections as net income attributable to Grace Stockholders adjusted for interest income and expense; income taxes; costs related to legacy matters; restructuring and repositioning expenses and asset impairments; pension costs other than service and interest costs, expected returns on plan assets, and amortization of prior service costs/credits; gains and losses on sales and exits of businesses, product lines, and certain other investments; third-party acquisition-related costs and the amortization of acquired inventory fair value adjustment; gains and losses on modification or extinguishment of debt; the effects of these items on equity in earnings of unconsolidated affiliate; and certain other items that are not representative of underlying trends. |
Important Information Regarding the Management Projections
The Management Projections were developed by Grace management on a pro forma basis, giving effect to the proposed FCS Acquisition. The Management Projections, however, do not give effect to the Merger and the other transactions contemplated by the Merger Agreement. Furthermore, the Management Projections do not take into account the effect of any failure of the transactions contemplated by the Merger Agreement or the FCS Acquisition to be completed and should not be viewed as accurate or continuing in that context. Although the Management Projections are presented with numerical specificity, they were based on numerous estimates, variables and assumptions made by Grace management with respect to industry performance, general business, economic, regulatory, market and financial conditions and other future events, including the completion of the FCS Acquisition, as well as matters specific to Grace’s business, all of which are difficult or impossible to predict accurately and many of which are beyond Grace’s control.
The Management Projections constitute forward-looking information and are subject to many risks and uncertainties that could cause actual results to differ materially from the results forecasted in the Management Projections, including, but not limited to, Grace’s performance, industry performance, general business and economic conditions, customer requirements, staffing levels, competition, adverse changes in applicable laws, regulations or rules, the ability to successfully pursue and complete acquisitions, including the FCS Acquisition, and the various risks set forth in Grace’s reports filed with the SEC. For additional information on factors that
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may cause Grace’s future results to materially vary, see the section of this proxy statement captioned “Forward-Looking Statements.” There can be no assurance that the Management Projections will be realized or that actual results will not be significantly higher or lower than the Management Projections. The Management Projections cover several years, and such information by its nature becomes less reliable with each successive year. In addition, the Management Projections will be affected by Grace’s ability to achieve strategic goals, objectives and targets over the applicable periods, including the consummation of the FCS Acquisition. The Management Projections reflect assumptions as to certain business decisions that are subject to change and cannot, therefore, be considered a guarantee of future operating results, and this information should not be relied on as such. The inclusion of the Management Projections should not be regarded as an audit committee reportindication that Grace, Goldman Sachs, Moelis, their respective officers, directors, affiliates, advisors, or other representatives or anyone who received this information then considered, or now considers, them a reliable prediction of future events, and this information should not be relied upon as requiredsuch. The inclusion of the Management Projections in this proxy statement should not be regarded as an indication that the Management Projections will be necessarily predictive of actual future events, including Grace’s ability to consummate the FCS Acquisition. No representation is made by Grace or any other person regarding the Management Projections or Grace’s ultimate performance compared to such information. The Management Projections should be evaluated, if at all, in conjunction with the historical financial statements and other information about Grace contained in Grace’s public filings with the SEC. For more information, please see the section of this proxy statement captioned “Where You Can Find More Information.” In light of the foregoing factors, and the uncertainties inherent in the Management Projections, stockholders are cautioned not to place undue, if any, reliance on the Management Projections.
The Management Projections were not prepared with a view toward public disclosure or with a view toward complying with the published guidelines of the SEC regarding projections or accounting principles generally accepted in the United States Securities(“GAAP”), or the guidelines established by the American Institute of Certified Public Accountants with respect to prospective financial information. Neither Grace’s independent auditor nor any other independent accountant has compiled, examined or performed any procedures with respect to the Management Projections, nor have they expressed any opinion or any other form of assurance on such information or its achievability.
Adjusted EBITDA and Exchange Commission,Adjusted EBIT contained in the Management Projections summarized above are “non-GAAP financial measures,” which are financial performance measures that are not calculated in accordance with GAAP. The non-GAAP financial measures used in the Management Projections were relied upon by Goldman Sachs and Moelis for purposes of their respective opinions and by the Board of Directors in connection with its evaluation of the Merger. The SEC rules which would otherwise require a reconciliation of a non-GAAP financial measure to a GAAP financial measure do not apply to non-GAAP financial measures included in disclosures relating to a proposed business combination such as the Merger if the disclosure is included in a document such as this proxy statement. In addition, reconciliations of non-GAAP financial measures were not relied upon by Goldman Sachs or SEC.Moelis for purposes of their respective opinions or by the Board of Directors in connection with its evaluation of the Merger. Accordingly, Grace has not provided a reconciliation of the financial measures included in the Management Projections to the relevant GAAP financial measures. Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information presented in compliance with GAAP, and non-GAAP financial measures as used by Grace may not be comparable to similarly titled amounts used by other companies. Furthermore, there are limitations inherent in non-GAAP financial measures because they exclude charges and credits that are required to be included in a GAAP presentation. Accordingly, these non-GAAP financial measures should be considered together with, and not as an alternative to, financial measures prepared in accordance with GAAP.
The Audit Committee has the authority and responsibility for the appointment, retention, compensation, oversight and, if circumstances dictate, dischargesummary of Grace’s independent auditors, including pre-approval of all audit and non-audit servicessuch information above is included solely to be performed by the independent auditors. The independent auditors report directly to the Audit Committee and, with the internal auditors, have fullgive stockholders access to the Audit Committee and routinely meet withinformation that was made available to the Audit Committee without management being present. The Audit Committee is also responsible for reviewing, approving and ratifying any related party transaction.
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In considering the recommendation of the Compensation Committee. Board of Directors that the Grace Stockholders adopt the Merger Agreement, the Grace Stockholders should be aware that the executive officers and directors of Grace have certain interests in the Merger that may be different from, or in addition to, the interests of the Grace Stockholders generally. The Board of Directors was aware of these interests and considered them, among other matters, in approving the Merger Agreement and the transactions contemplated hereby, including the Merger, and in making their recommendation that the Grace Stockholders adopt the Merger Agreement.
For portionspurposes of those meetings, this disclosure,
the Chairman, theexecutive officers of Grace are:
Hudson La Force, President and CEO, and theChief Executive Officer;
William C. Dockman, Senior Vice President and Chief Financial Officer;
Elizabeth C. Brown, Senior Vice President, Human Resources Officer, also attended and were givenInformation Technology and Chief Human Resources Officer;
Keith N. Cole, Senior Vice President, Public Affairs and Environment, Health, Safety, and Chief Sustainability Officer;
Cherée H. Johnson, Senior Vice President, General Counsel and Secretary; and
Mark A. Shelnitz, Former Senior Vice President, General Counsel and Secretary
As disclosed in prior SEC filings, Mr. Shelnitz resigned his position as Senior Vice President, General Counsel and Secretary on December 31, 2020. Mr. Shelnitz is entitled to certain payments in respect of his outatanding and unvested Company Equity Awards in connection with the opportunityMerger but is not otherwise entitled to express their views on executive compensationany payments or benefits in connection with the Merger.
Treatment of Company Equity Awards
The Merger Agreement provides that each Company Option and each Company SAR that is outstanding immediately prior to the Compensation Committee.Effective Time will vest at closing and be converted into the right to receive an amount in cash equal to the product of Merger Consideration (less the applicable exercise price) and the number of shares of Common Stock covered by such Company Option or Company SAR (without interest and less applicable withholding taxes). Payment of these cash amounts will be paid within three (3) business days after the Effective Time. Any Company Option or Company SAR that has a per share exercise price that is greater than or equal to the Merger Consideration will be cancelled at the Effective Time for no consideration or payment.
The Compensation Committee members are Robert F. Cummings, Jr., Julie Fasone Holder, Diane H. Gulyas, Jeffry N. Quinn, Christopher J. Steffen, Mark E. Tomkins,Merger Agreement provides that each Company RSU Award and Shlomo Yanai,each Company Performance Share Award that is outstanding immediately prior to the Effective Time will be assumed and converted into the right to receive an amount in cash (without interest) equal to the product obtained by multiplying the Merger Consideration by the number of shares of Common Stock covered by such award immediately prior to the Effective Time, which converted cash award will be subject to continued service vesting and other terms as set forth in the Merger Agreement.
For an estimate of the value of unvested equity awards that would vest assuming that the Merger occurs on May 19, 2021and each of whom is: independent under the independence standardsnamed executive officers experiences a qualifying termination on that date, see “—Quantification of Payments and Benefits to Grace’s Named Executive Officers” below. We estimate that the value of unvested equity awards held by our executive officer who is not a named executive officer that would vest assuming that the Merger occurs on May 19, 2021and such executive officer experiences a qualifying termination on that date is $914,830. Grace’s non-employee directors do not hold equity awards that would vest in connection with the closing of the NYSE;Merger.
Executive Change in Control Severance Agreements
Each of the Grace executive officers (other than Mr. Shelnitz) is party to a “non employee director”change in control severance agreement with Grace. Each change in control severance agreement provides that, in the event of Gracea termination without “cause” or for “good reason” (in each case, as defined under Rule 16b-3in the applicable change in control severance agreement) following a change in control, the executive officer will be entitled to (i) accrued base salary and
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employee benefits through the date of termination, (ii) an annual bonus for the year prior to termination payable at target levels, to the extent such bonus remains unpaid as of the Exchange Act; and an “outside director”date of the change in control, (iii) a prorated target bonus for the purposesyear of termination, (iv) severance equal to 300% of the corporate compensation provisions (previously) containedsum of his or her annual base salary plus target annual bonus (subject to reduction if the executive is above age 62 at the time of termination), payable in a lump sum, and (v) continued payment by the Company of life and health insurance premiums for 24 months of coverage for the executive and, in the case of such health insurance coverage, his or her dependents, subject to reduction in the event an executive receives comparable benefits during such period following termination of employment, as well as outplacement services. In connection with the Merger, Grace expects to amend the change in control severance agreements with each of Messrs. Cole and Dockman to remove the reduction in severance payments if the executive is above age 62 at the time of termination. The change in control severance agreements provide that any payments and benefits payable to the executive officer will be reduced to the extent necessary to avoid any excise taxes on “excess parachute payments” that would otherwise be imposed under Section 162(m)280G and Section 4999 of the Internal Revenue Code of 1986, as amended or Tax Code. Ms. Gulyas serves as Chair(the “Code”).
For an estimate of the Compensation Committee.
qualifying termination on May 19, 2021, see the adherencesection of this proxy statement captioned “—Quantification of Payments and Benefits to those procedures, programs, policies and practices at all levels of Grace; and
Grace’s Named Executive Officers” below. We estimate that the maintenance of open communications to ensure that issues are brought to the attention of, and considered by, all appropriate parties.
Treatment of Annual Bonuses
Retention Program
Under the terms of the Merger Agreement, Grace may provide each of its executive officers. The Corporate Responsibility Committee manages certain risks relatedofficers (other than Mr. Shelnitz) with a retention bonus equal to government regulation50% of the severance payment that would be payable under each such executive’s change in control severance agreement, which retention bonus will be payable subject to continued employment through the first anniversary of the closing of the Merger. In the event any such executive’s employment is terminated by Grace prior to the first anniversary of the closing, the executive will not be entitled to receive such retention bonus, but would remain eligible to receive a severance payment as set forth in the executive’s change in control severance agreement.
Penalty Tax Make-Whole Payments
Grace expects to provide each of its named executive officers (other than Mr. Shelnitz), as well as Grace’s executive officer who is not a named executive officer, with a payment that is intended to mitigate the impact of Sections 280G and environment, health4999 of the Code on each such officers (a “Penalty Tax Make-Whole Payment”). These payments would be made if and safety matters.
Executive Officer | | | ($) |
Mr. La Force | | | 4,343,584 |
Mr. Dockman | | | 1,555,041 |
Ms. Brown | | | 1,165,888 |
Mr. Cole | | | 1,004,985 |
Ms. Johnson | | | 1,006,182 |
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Indemnification and Insurance
Pursuant to the terms of the Merger Agreement, Grace’s directors and senior executives are fully alignedexecutive officers will be entitled to certain ongoing indemnification and coverage for a period of six (6) years following the Effective Time under directors’ and officers’ liability insurance policies from the Surviving Corporation. This indemnification and insurance coverage is further described in the section captioned “Proposal 1: Adoption of the Merger Agreement—Indemnification and Insurance.”
Quantification of Payments and Benefits to Grace’s Named Executive Officers
The table below sets forth the amount of payments and benefits that each of Grace’s named executive officers would receive in connection with the long-term interests of our shareholders, our Board implemented stock ownership guidelines. The current guidelines are as follows:
For purposes of each of his annual cash retainer and his additional cash retainer for serving as Non-executive Chairman. Mr. La Force does not receive any additional compensation for servingthis discussion, “single trigger” refers to benefits that arise as a memberresult of our Boardthe completion of Directors.the Merger and “double trigger” refers to benefits that require two conditions, which are the completion of the Merger and a qualifying termination.
Golden Parachute Compensation
Named Executive Officer | | | Cash ($)(1) | | | Equity Awards ($)(2) | | | Perquisites/Benefits ($)(3) | | | Tax Reimbursement ($)(4) | | | Total ($) |
Hudson La Force | | | 6,059,204 | | | 9,243,203 | | | 53,269 | | | 4,343,584 | | | 19,699,260 |
William C. Dockman | | | 2,597,052 | | | 2,167,007 | | | 38,681 | | | 1,555,041 | | | 6,357,781 |
Elizabeth C. Brown | | | 2,343,282 | | | 1,469,424 | | | 50,690 | | | 1,165,888 | | | 5,029,284 |
Keith N. Cole | | | 2,038,591 | | | 1,208,755 | | | 49,152 | | | 1,004,985 | | | 4,301,483 |
Mark A. Shelnitz | | | 0 | | | 118,160 | | | 0 | | | 0 | | | 118,160 |
| Name (a) | Fees Earned or Paid in Cash ($)(a) | Stock Awards ($)(b) | Option Awards ($) | Non-Equity Incentive Plan Compensation ($) | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($) | All Other Compensation ($)(c) | Total ($) | ||||||||||||
| H. F. Baldwin(d) | 21,250 | — | — | — | — | — | 21,250 | ||||||||||||
| R. F. Cummings, Jr. | 85,000 | 104,990 | — | — | — | — | 189,990 | ||||||||||||
| J. Fasone Holder | 88,750 | 104,990 | — | — | — | 3,000 | 196,740 | ||||||||||||
| D. H. Gulyas | 98,083 | 104,990 | — | — | — | — | 203,073 | ||||||||||||
| J. N. Quinn | 89,667 | 104,990 | — | — | — | — | 194,657 | ||||||||||||
| C. J. Steffen | 120,000 | 104,990 | — | — | — | 3,000 | 227,990 | ||||||||||||
| M. E. Tomkins | 102,000 | 104,990 | — | — | — | — | 206,990 | ||||||||||||
| S. Yanai(e) | 63,750 | 104,990 | — | — | — | — | 168,740 | ||||||||||||
| (1) | |
Cash Severance for Named Executive Officers. Each of |
| (2) | |
Company Equity Award Treatment. As described in more detail in “—Merger Consideration—Treatment of Company Equity Awards,” each Company Option and each Company SAR that is outstanding immediately prior to the |
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Set forth below are the values of each type of unvested Company Equity Award held by the named executive officers that would become vested upon the consummation of the Merger (i.e., “single trigger”) or a termination without “cause” or for “good reason” within two years after the Merger (i.e., “double trigger”).
Named Executive Officer | | | Company Options Outstanding as of May 19, 2021 (Single Trigger) ($) | | | Company SARs Outstanding as of May 19, 2021 (Single Trigger) ($) | | | Company RSU Awards Outstanding as of May 19, 2021 (Double Trigger) ($) | | | Company Performance Share Awards Outstanding as of May 19, 2021 (Double Trigger) ($) | | | Total ($) |
Hudson La Force | | | 814,853 | | | 0 | | | 3,644,900 | | | 4,783,450 | | | 9,243,203 |
William C. Dockman | | | 203,717 | | | 0 | | | 831,810 | | | 1,131,480 | | | 2,167,007 |
Elizabeth C. Brown | | | 140,054 | | | 0 | | | 576,870 | | | 752,500 | | | 1,469,424 |
Keith N. Cole | | | 114,585 | | | 0 | | | 478,450 | | | 615,720 | | | 1,208,755 |
Mark A. Shelnitz | | | 0 | | | 0 | | | 0 | | | 118,160 | | | 118,160 |
| (3) | Health and Welfare Benefits for Named Executive Officers. Each change in control severance agreement with |
| (4) | |
Penalty Tax Make-Whole Payments. Grace expects to provide each of |
Parent and Merger Sub have obtained committed financing consisting of (i) equity to be provided by Standard Industries Holdings pursuant to the terms of the Equity Commitment Letter and (ii) debt financing to be provided pursuant to the Debt Commitment Letter by the lenders party thereto. In connection with the Merger Agreement, Parent and Merger Sub have delivered to Grace copies of the Commitment Letters. Notwithstanding anything in the Merger Agreement to the contrary, in no event will the receipt or availability of any funds or financing (including the financing contemplated by the Commitment Letters) by or to Parent or any of its affiliates or any other financing transaction be a condition to any of the obligations of Parent or Merger Sub under the Merger Agreement.
Equity Financing
Pursuant to the Equity Commitment Letter, Standard Industries Holdings has committed to contribute to Parent at the closing of the Merger an aggregate amount in cash equal to $3,516 million for the purpose of funding the Merger Amounts. The Compensation Committee reviews director compensationobligations of Standard Industries Holdings to provide the equity financing under the Equity Commitment Letter are subject to a number of conditions, including, but not limited to: (i) the execution and delivery of the Merger Agreement by Grace; (ii) the satisfaction or waiver of all of the conditions to the obligations of Grace, Parent and Merger Sub to consummate the Merger set forth in Section 7.01 and Section 7.03 of the Merger Agreement (other than those conditions that by their nature are to be satisfied at the closing of the Merger, but which are capable of being satisfied at such time), and (iii) the debt financing contemplated by the Debt Commitment Letter or, if applicable, alternative debt financing, has been funded or will be funded at the closing of the Merger if the equity
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financing under the Equity Commitment Letter is funded at the closing of the Merger. We refer to the equity financing described in the preceding sentence as the “Equity Financing,” and we refer to the Equity Financing together with the Debt Financing (as defined below) as the “Financing.”
The obligation of Standard Industries Holdings to fund the equity commitment will automatically and immediately terminate upon the earliest to occur of: (i) the consummation of the closing of the Merger in accordance with the Merger Agreement and the funding of the Equity Financing, (ii) the valid termination of the Merger Agreement in accordance with its terms (including, if payable thereunder, the payment of the Parent Termination Fee), (iii) the assertion by the Company or any of its controlled affiliates or any of its and their respective representatives (acting at their direction or on their behalf) of any claim against Standard Industries Holdings or any of its related parties in connection with the transaction documents or the transactions contemplated thereby or the ownership of Grace common stock by Standard Industries Holdings or any of its related parties (except for certain permitted claims).
Grace is an express third-party beneficiary of the Equity Commitment Letter and may cause Standard Industries Holdings to perform its funding obligations under the Equity Commitment Letter subject to (i) the limitations and conditions set forth in the Equity Commitment Letter and (ii) the terms and conditions of the Merger Agreement. Standard Industries Holdings has announced that the Equity Financing will be supported by (a) the available cash of its subsidiary, Standard Industries Inc., (b) up to $2,500 million in proceeds from a secured term loan and (c) a financing commitment of $600 million by certain investment funds affiliated with Apollo Global Management.
Debt Financing
The Debt Commitment Letter provides that the lenders party thereto will provide, upon the terms and subject to the conditions set forth in the Debt Commitment Letter, in the aggregate up to $3,905 million in debt financing (not all of which is expected to be drawn at the closing of the Merger), consisting of the following:
$2.5 billion senior secured term loan B facility;
$450 million senior secured revolving credit facility; and
$955 million senior unsecured bridge credit facility.
We refer to the debt financing described above as the “Debt Financing.” The proceeds of the Debt Financing will be used by Parent and Merger Sub (i) to effect the Merger and related transactions on the Closing Date, (ii) for working capital, capital expenditures and other general corporate purposes and (iii) to pay fees and expenses related to the Merger and related transactions.
The obligations of the lenders party to the Debt Commitment Letter to provide the Debt Financing under the Debt Commitment Letter are subject to a number of customary conditions, including, but not limited to (as applicable):
the absence of a Company Material Adverse Effect since April 26, 2021;
the consummation in all material respects of the Merger in accordance with the Merger Agreement as in effect on April 26, 2021 (without any amendment, modification or waiver of any of the provisions thereof that would be materially adverse to the lenders in their capacity as such without the consent of the lead arrangers, such consent not to be unreasonably withheld, delayed or conditioned);
subject to certain limitations and exceptions, the accuracy in all material respects as of the closing of the Merger of certain specified representations and warranties in the Merger Agreement and certain specified representations and warranties in the loan documents;
the Equity Financing has occurred or, substantially concurrently with the initial funding of the Debt Financing, will occur; and
such lenders having been afforded a Marketing Period (as defined in the section of this proxy statement captioned “—Closing and Effective Time”) of at least annually. The Compensation Committee15 consecutive business days (subject to certain blackout dates) following receipt of certain required financial information regarding Grace.
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As of the date hereof, the documentation governing the Debt Financing contemplated by the Debt Commitment Letter has not been finalized and, accordingly, the sole authorityactual terms of the Debt Financing may differ from those described in this proxy statement.
Guaranty
Pursuant to engage a consulting firmthe Guaranty, Standard Industries Holdings has agreed to evaluate director compensationguarantee the discharge when due of Parent’s obligation to pay: (i) the Parent Termination Fee (as defined under the caption “Proposal 1: Adoption of the Merger Agreement—Termination Fee”) pursuant and in 2018, engaged Willis Towers Watson,accordance with the Merger Agreement; (ii) the reimbursement obligations of Parent in connection with fees and expenses payable pursuant to and in accordance with the Merger Agreement; (iii) the reimbursement and indemnification obligations of Parent and Merger Sub in connection with debt financing; and (iv) any enforcement expenses due by Parent pursuant to legal proceedings as a result of certain defaults under the Merger Agreement. We refer to the obligations set forth in the preceding sentence as the “Guaranteed Obligations.” The obligations of Standard Industries Holdings under the Guaranty are subject to an aggregate cap equal to $290 million.
Subject to specified exceptions, the Guaranty will terminate upon the earliest to occur of:
the consummation of the closing of the Merger;
90 days following the valid termination of the Merger Agreement unless prior to such date (i) Grace has delivered a written notice with respect to the Guaranteed Obligations or "WTW,"(ii) Grace has commenced a human resources consulting firm,legal proceeding against Standard Industries Holdings, Parent or Merger Sub alleging that any Guaranteed Obligations are due and owing, in which case the Guaranty will survive only with respect to assistsuch obligations and will terminate upon the final, non-appealable resolution of all such legal proceedings by a court of competent jurisdiction and the satisfaction by Standard Industries Holdings of any obligations finally determined to be owed by Standard Industries Holdings consistent with the terms of the Guaranty; and
the actual receipt in establishing director compensation. full by Grace of all Guaranteed Obligations (regardless of whether paid by Standard Industries Holdings or by Parent or an affiliate thereof), except to the extent that any payment to Grace in respect of any Guaranteed Obligations is rescinded or otherwise returned.
The Compensation Committee determines director compensation basedclosing of the Merger will take place (i) at 10:00 a.m., New York City time, on recommendations and information provided by WTW and based on reviewing commercially available survey data from WTW relatedthe third (3rd) business day following the satisfaction or waiver of all conditions to general industry director compensation trends at companiesclosing of comparable size and our peer group companiesthe Merger (as described under the caption, "Executive Compensation—Compensation Discussion“Proposal 1: Adoption of the Merger Agreement—Conditions to the Closing of the Merger”), other than conditions that by their terms are to be satisfied at the closing but subject to the satisfaction or waiver of such conditions at such time, unless the Marketing Period (as defined below) has not concluded at the time the closing would have otherwise been required to occur, in which case the closing will take place on the date following the satisfaction or waiver of the conditions to closing of the Merger that is the earliest to occur of (a) any business day during the Marketing Period specified by Parent on at least three (3) business days’ written notice to Grace and Analysis"(b) the third (3rd). business day immediately following the last day of the Marketing Period (subject in each case to the satisfaction or waiver of all of the conditions to the closing of the Merger set forth in the Merger Agreement at or prior to such time (other than those conditions that by their terms are to be satisfied at the closing, but subject to the satisfaction or waiver of those conditions at such time)), or (ii) at another date and time mutually agreed upon in writing between Grace and Parent. For purposes of the Merger Agreement, “business day” refers to any day except a Saturday, a Sunday or any other day on which banking and savings and loan institutions are authorized or required by applicable law to close in New York, New York.
For purposes of this proxy statement, “Marketing Period” means the first period of 15 consecutive business days commencing on or after the date of the Merger Agreement throughout which and on the first and last day of which (i) Parent has the Required Information (as defined in the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—Cooperation with Debt Financing”) and such Required Information (as provided at the beginning of such 15 consecutive business day period) is and remains compliant with certain requirements in the Merger Agreement, and (ii) the conditions to Parent’s obligation to effect the Merger have been satisfied or waived (except for those conditions that by their terms are to be satisfied at the closing) and nothing shall have occurred and no condition shall exist that would cause any of the conditions to
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Parent’s obligation to effect the Merger to fail to be satisfied assuming the closing would be scheduled at any time during such 15 consecutive business day period; provided that, for purposes of determining the Marketing Period, (a) if the Marketing Period has not ended by August 20, 2021, then the Marketing Period will not commence prior to September 9, 2021, (b) if the Marketing Period has not ended by December 17, 2021, then the Marketing Period will not commence prior to January 3, 2022 and (c) July 2, 2021, July 5, 2021, November 24, 2021 and November 26, 2021 will not be business days; provided, further, that if Grace in good faith reasonably believes that the Required Information has been delivered to Parent and the Required Information is compliant with the requirements in the Merger Agreement, it may deliver to Parent a written notice to that effect (stating that it believes that such delivery has been completed and the Required Information is compliant), in which case the Required Information will be deemed to have been provided and compliant (and, if the other conditions set forth in this definition have been met, the Marketing Period commenced) on the first business day following the date such notice is deemed to have been received pursuant to the Merger Agreement unless Parent in good faith reasonably believes the delivery of the Required Information has not been completed or is not compliant and, within two (2) business days of the delivery of such notice by Grace, delivers a written notice to Grace to that effect (stating with specificity which Required Information that Parent reasonably believes has not been delivered or is not compliant), in which case the Marketing Period will be deemed to have not commenced and will only commence beginning on the date of delivery to Parent of the Required Information that is compliant and the other conditions set forth in this definition having been met. Notwithstanding the foregoing, the Marketing Period will not commence and will be deemed not to have commenced if, on or prior to the completion of such 15 consecutive business day period, Grace indicates its intent to restate any financial statements or material financial information included in the Required Information, in which case the Marketing Period will be deemed not to commence unless and until such restatement has been completed and the applicable Required Information has been amended or Grace has announced that it has concluded that no restatement will be required. If the Required Information is not compliant with the requirements in the Merger Agreement throughout and on the first and the last day of such period, then a new 15 consecutive business day period will commence upon Parent receiving updated Required Information that is compliant and the other conditions set forth in this definition having been met. Notwithstanding anything in the Merger Agreement to the contrary, the Marketing Period will be deemed to have been completed on any date on which Parent or its subsidiaries obtains proceeds of a high yield financing in an amount sufficient to replace the bridge facilities contemplated by the Debt Commitment Letter (including proceeds obtained in escrow) and completed syndication of the term loan and revolving credit facilities contemplated by the Debt Commitment Letter.
Under Section 262, if the Merger is completed, holders of shares of Grace common stock who: (i) submit a written demand for appraisal of their shares; (ii) do not vote in favor of the adoption of the Merger Agreement; (iii) continuously are the record holders of such shares through the Effective Time; and (iv) otherwise exactly follow the procedures set forth in Section 262 may be entitled to have their shares appraised by the Delaware Court of Chancery and to receive payment in cash of the “fair value” of the shares of Grace common stock, exclusive of any element of value arising from the accomplishment or expectation of the Merger, together with
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interest to be paid on or before February 28, 2019,the amount determined to be fair value, if any, as determined by each person that is the beneficial ownercourt. However, after an appraisal petition has been filed, the Delaware Court of more than 5%Chancery will dismiss appraisal proceedings as to all stockholders who have asserted appraisal rights unless (a) the total number of shares for which appraisal rights have been pursued and perfected exceeds 1% of the outstanding shares of Grace common stock as reflectedmeasured in such Schedule 13Daccordance with subsection (g) of Section 262; or Schedule 13G (or amendment thereto); and
| Name and Address of Beneficial Owner (1) | Shares of Common Stock Beneficially Owned | Percent (2) | |||
| 40 North Management LLC (3) | 9,344,510 | 14.0 | |||
| 9 West 57th Street, 30th Floor New York, NY 10019 | |||||
| The Vanguard Group, Inc. (4) | 6,172,876 | 9.2 | |||
| 100 Vanguard Blvd. Malvern, PA 19355 | |||||
| R. F. Cummings | 13,328 | ||||
| 2,000 | (5) | ||||
| 15,328 | * | ||||
| J. Fasone Holder | 2,979 | * | |||
| A. E. Festa | 326,395 | ||||
| 429,439 | (6) | ||||
| 755,834 | 1.1 | ||||
| D. H. Gulyas | 9,328 | * | |||
| H. La Force | 92,200 | ||||
| 90,232 | (6) | ||||
| 182,432 | * | ||||
| J. N. Quinn | 4,752 | ||||
| 4,547 | (5) | ||||
| 9,299 | * | ||||
| K. G. Reiland (3) | — | * | |||
| H. R. Slack | — | * | |||
| C. J. Steffen | 19,455 | * | |||
| M. E. Tomkins | 17,328 | * | |||
| S. Yanai | 1,478 | * | |||
| E. C. Brown | 14,845 | ||||
| 48,560 | (6) | ||||
| 63,405 | * | ||||
| K. N. Cole | 10,831 | ||||
| 49,598 | (6) | ||||
| 60,429 | * | ||||
| M. A. Shelnitz | 64,461 | ||||
| 12,097 | (5) | ||||
| 55,992 | (6) | ||||
| 132,550 | * | ||||
| T. E. Blaser (7) | 18,910 | ||||
| 37,039 | (6) | ||||
| 55,949 | * | ||||
| Current directors, nominees, and executive officers as a group (14 persons) | 577,380 | ||||
| 18,644 | (5) | ||||
| 710,860 | (6) | ||||
| 1,306,884 | 2.0 | ||||
| Plan Category | Number of securities to be issued upon exercise of outstanding options, warrants and rights (#)(2) | Weighted-average exercise price of outstanding options, warrants and rights ($)(2)(3) | Number of securities remaining available for future issuance under equity compensation plans (excluding securities to be issued upon exercise of outstanding options, warrants and rights) (#)(2)(4) | |||
| Equity compensation plans approved by security holders(1) | 2,302,852 | 72.34 | 7,455,144 | |||
Under Section 262, where a Merger Agreement is to be submitted for adoption at a meeting of stockholders, the corporation, not less than 20 days prior to the meeting, must notify each of its stockholders who was such on the record date for notice of such meeting with respect to shares for which appraisal rights are available that appraisal rights are available and include in the notice a copy of Section 262. This proxy statement constitutes Grace’s notice to stockholders that appraisal rights are available in connection with the Merger, and the full text of Section 262 is attached to this proxy statement as Annex D. In connection with the Merger, any holder of shares of Grace common stock who wishes to exercise appraisal rights, or who wishes to preserve such holder’s right to do so, should review Annex D carefully. Failure to strictly comply with the requirements of Section 262 in a timely and proper manner may result in the loss of appraisal rights under the DGCL. A stockholder who loses his, her or its appraisal rights will be entitled to receive the Merger Consideration described in the Merger Agreement. Moreover, because of the complexity of the procedures for exercising the right to voteseek appraisal of shares of Grace common stock, Grace believes that if a stockholder considers exercising such rights, that stockholder should seek the advice of legal counsel.
Stockholders wishing to be voted (i)exercise the right to seek an appraisal of their shares of Grace common stock must do ALL of the following:
the stockholder must not vote in favor of all nomineesthe proposal to adopt the Merger Agreement;
the stockholder must deliver to Grace a written demand for director recommendedappraisal before the vote on the Merger Agreement at the Special Meeting;
the stockholder must continuously hold the shares from the date of making the demand through the Effective Time (a stockholder will lose appraisal rights if the stockholder transfers the shares before the Effective Time); and
the stockholder (or any person who is the beneficial owner of shares of Grace common stock held either in a voting trust or by our Board, (ii) against any nominees for director not recommended by our Board and (iii) against any proposals to remove any director. The 40 North Parties may extenda nominee on behalf of such person) or the effectivenessSurviving Corporation must file a petition in the Delaware Court of Chancery requesting a determination of the Letterfair value of the shares within 120 days after the Effective Time. The Surviving Corporation is under no obligation to file any petition and has no intention of doing so.
In addition, one of the ownership thresholds must be met.
Because a proxy that does not contain voting instructions will, unless revoked, be voted in favor of the adoption of the Merger Agreement, into 2021. Concurrentlya stockholder who votes by proxy and who wishes to exercise appraisal rights must vote against the adoption of the Merger Agreement, abstain or not vote its shares.
Filing Written Demand
Any holder of shares of Grace common stock wishing to exercise appraisal rights must deliver to Grace, before the vote on the adoption of the Merger Agreement at the Special Meeting at which the proposal to adopt the Merger Agreement will be submitted to stockholders, a written demand for the appraisal of the stockholder’s
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shares, and that stockholder must not vote or submit a proxy in favor of the adoption of the Merger Agreement. A holder of shares of Grace common stock exercising appraisal rights must hold of record the shares on the date the written demand for appraisal is made and must continue to hold the shares of record through the Effective Time. A proxy that is submitted and does not contain voting instructions will, unless revoked, be voted in favor of the adoption of the Merger Agreement, and it will constitute a waiver of the stockholder’s right of appraisal and will nullify any previously delivered written demand for appraisal. Therefore, a stockholder who submits a proxy and who wishes to exercise appraisal rights must submit a proxy containing instructions to vote against the adoption of the Merger Agreement or abstain from voting, or otherwise fail to vote, on the adoption of the Merger Agreement. Neither voting against the adoption of the Merger Agreement nor abstaining from voting or failing to vote on the proposal to adopt the Merger Agreement will, in and of itself, constitute a written demand for appraisal satisfying the requirements of Section 262. The written demand for appraisal must be in addition to and separate from any proxy or vote on the adoption of the Merger Agreement. A proxy or vote against the adoption of the Merger Agreement will not constitute a demand. A stockholder’s failure to make the written demand prior to the taking of the vote on the adoption of the Merger Agreement at the Special Meeting of Grace Stockholders will constitute a waiver of appraisal rights.
Only a holder of record of shares of Grace common stock is entitled to demand appraisal rights for the shares registered in that holder’s name. A demand for appraisal in respect of shares of Grace common stock must be executed by or on behalf of the holder of record, and must reasonably inform Grace of the identity of the holder and state that the person intends thereby to demand appraisal of the holder’s shares in connection with the executionMerger. If the shares are owned of record in a fiduciary or representative capacity, such as by a trustee, guardian or custodian, such demand must be executed by or on behalf of the Letter Agreement,record owner, and if the Companyshares are owned of record by more than one (1) person, as in a joint tenancy and tenancy in common, the 40 North Parties entered intodemand must be executed by or on behalf of all joint owners. An authorized agent, including an agreement (the “Confidentiality Agreement”)authorized agent for two (2) or more joint owners, may execute a demand for appraisal on behalf of a holder of record; however, the agent must identify the record owner or owners and expressly disclose that, in executing the demand, the agent is acting as agent for the record owner or owners.
STOCKHOLDERS WHO HOLD THEIR SHARES IN BROKERAGE OR BANK ACCOUNTS OR OTHER NOMINEE FORMS AND WHO WISH TO EXERCISE APPRAISAL RIGHTS SHOULD CONSULT WITH THEIR BANK, BROKER OR OTHER NOMINEES, AS APPLICABLE, TO DETERMINE THE APPROPRIATE PROCEDURES FOR THE BANK, BROKER OR OTHER NOMINEE TO MAKE A DEMAND FOR APPRAISAL OF THOSE SHARES. A PERSON HAVING A BENEFICIAL INTEREST IN SHARES HELD OF RECORD IN THE NAME OF ANOTHER PERSON, SUCH AS A BANK, BROKER OR OTHER NOMINEE, MUST ACT PROMPTLY TO CAUSE THE RECORD HOLDER TO FOLLOW PROPERLY AND IN A TIMELY MANNER THE STEPS NECESSARY TO PERFECT APPRAISAL RIGHTS.
All written demands for appraisal pursuant to whichSection 262 should be mailed or delivered to:
W. R. Grace & Co.
Attention: Senior Vice President, General Counsel and Secretary
7500 Grace Drive
Columbia, Maryland 21044
Any holder of shares of Grace common stock who has delivered a written demand to Grace and who has not commenced an appraisal proceeding or joined that proceeding as a named party may withdraw his, her or its demand for appraisal and accept the 40 North Parties agreed to keep confidential certain informationconsideration offered pursuant to the Merger Agreement by delivering to Grace a written withdrawal of the demand for appraisal. However, any such attempt to withdraw the demand made more than 60 days after the Effective Time will require written approval of the Surviving Corporation. No appraisal proceeding in the Delaware Court of Chancery will be dismissed as to any stockholder without the approval of the Delaware Court of Chancery, and such approval may be conditioned upon such terms as the Delaware Court of Chancery deems just; provided, however, that this will not affect the right of any stockholder who has not commenced an appraisal proceeding or joined that proceeding as a named party to withdraw such stockholder’s demand for appraisal and conditionsto accept the Merger Consideration within 60 days after the Effective Time. If an appraisal proceeding is commenced and Grace, as the Surviving Corporation, does not approve a request to withdraw a demand for appraisal when that approval is required, or, except with respect to any stockholder who withdraws such stockholder’s demand in accordance with the proviso in the immediately
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preceding sentence, if the Delaware Court of Chancery does not approve the dismissal of an appraisal proceeding with respect to a stockholder, the stockholder will be entitled to receive only the appraised value determined in any such appraisal proceeding, which value could be less than, equal to or more than the Merger Consideration being offered pursuant to the Merger Agreement.
Notice by the Surviving Corporation
If the Merger is completed, within 10 days after the Effective Time, the Surviving Corporation will notify each holder of shares of Grace common stock who has properly made a written demand for appraisal pursuant to Section 262, and who has not voted in favor of the adoption of the Merger Agreement, that the Merger has become effective and the effective date thereof.
Filing a Petition for Appraisal
Within 120 days after the Effective Time, but not thereafter, the Surviving Corporation or any holder of shares of Grace common stock who has complied with Section 262 and is entitled to seek appraisal under Section 262 (including for this purpose any beneficial owner of the relevant shares) may commence an appraisal proceeding by filing a petition in the Delaware Court of Chancery, with a copy served on the Surviving Corporation in the case of a petition filed by a stockholder (or beneficial owner), demanding a determination of the fair value of the shares held by all dissenting stockholders entitled to appraisal. The Surviving Corporation is under no obligation, and has no present intention, to file a petition, and stockholders should not assume that the Surviving Corporation will file a petition or initiate any negotiations with respect to the fair value of the shares of Grace common stock. Accordingly, any holders of shares of Grace common stock who desire to have their shares appraised should initiate all necessary action to perfect their appraisal rights in respect of their shares of Grace common stock within the time and in the manner prescribed in Section 262. The failure of a holder of Grace common stock to file such a petition within the period specified in Section 262 could nullify the stockholder’s previous written demand for appraisal.
Within 120 days after the Effective Time, any holder of shares of Grace common stock who has complied with the requirements of Section 262 and who is entitled to appraisal rights thereunder will be entitled, upon written request, to receive from the Surviving Corporation a statement setting forth the aggregate number of shares not voted in favor of the adoption of the Merger Agreement and with respect to which Grace has received demands for appraisal, and the aggregate number of holders of such shares. The Surviving Corporation must mail this statement to the requesting stockholder within 10 days after receipt by the Surviving Corporation of the written request for such a statement or within 10 days after the expiration of the period for delivery of demands for appraisal, whichever is later. A beneficial owner of shares of Grace common stock held either in a voting trust or by a nominee on behalf of such person may, in such person’s own name, file a petition seeking appraisal or request from the Surviving Corporation the foregoing statements. As noted above, however, the demand for appraisal can only be made by a stockholder of record.
If a petition for an appraisal is duly filed by a holder of shares of Grace common stock and a copy thereof is served upon the Surviving Corporation, the Surviving Corporation will then be obligated within 20 days after such service to file with the Delaware Register in Chancery a duly verified list containing the names and addresses of all stockholders who have demanded payment for their shares and with whom agreements as to the value of their shares have not been reached. Upon the filing of any such petition, the Delaware Court of Chancery may order that notice of the time and place fixed for the hearing on the petition be mailed to the Surviving Corporation and all of the stockholders shown on the written statement described above at the addresses stated therein. Such notice will also be published at least one (1) week before the day of the hearing in a newspaper of general circulation published in the City of Wilmington, Delaware, or in another publication determined by the court. The costs of these notices are borne by the Surviving Corporation. After notice to stockholders as required by the court, the Delaware Court of Chancery is empowered to conduct a hearing on the petition to determine those stockholders who have complied with Section 262 and who have become entitled to appraisal rights thereunder. The Delaware Court of Chancery may require the stockholders who demanded payment for their shares to submit their stock certificates (if any) to the Register in Chancery for notation thereon of the pendency of the appraisal proceedings and, if any stockholder fails to comply with the direction, the Delaware Court of Chancery may dismiss that stockholder from the proceedings. The Delaware Court of Chancery will dismiss appraisal proceedings as to all stockholders who have asserted appraisal rights if neither of the ownership thresholds is met.
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Determination of Fair Value
After determining the holders of Grace common stock entitled to appraisal and that at least one of the ownership thresholds described above has been satisfied as to stockholders seeking appraisal rights, the appraisal proceeding will be conducted in accordance with the rules of the Delaware Court of Chancery, including any rules specifically governing appraisal proceedings. Through such proceeding, the Delaware Court of Chancery will determine the “fair value” of the shares of Grace common stock, exclusive of any element of value arising from the accomplishment or expectation of the Merger, together with interest, if any, to be paid upon the amount determined to be the fair value. In determining fair value, the Delaware Court of Chancery will take into account all relevant factors. Unless the court in its discretion determines otherwise for good cause shown, interest from the Effective Time through the date of payment of the judgment will be compounded quarterly and will accrue at 5% over the Federal Reserve discount rate (including any surcharge) as established from time to time during the period between the Effective Time and the date of payment of the judgment. However, at any time before the Delaware Court of Chancery enters judgment in the appraisal proceedings, the Surviving Corporation may pay to each stockholder entitled to appraisal an amount in cash, in which case such interest will accrue after the time of such payment only on an amount that equals the difference, if any, between the amount so paid and the “fair value” of the shares as determined by the Delaware Court of Chancery, in addition to any interest accrued prior to the time of such voluntary payment, unless paid at such time.
In Weinberger v. UOP, Inc., the Supreme Court of Delaware discussed the factors that could be considered in determining fair value in an appraisal proceeding, stating that “proof of value by any techniques or methods which are generally considered acceptable in the financial community and otherwise admissible in court” should be considered, and that “[f]air price obviously requires consideration of all relevant factors involving the value of a company.” The Delaware Supreme Court stated that, in making this determination of fair value, the court must consider market value, asset value, dividends, earnings prospects, the nature of the enterprise and any other facts that could be ascertained as of the date of the Merger that throw any light on future prospects of the merged corporation. Section 262 provides that fair value is to be “exclusive of any element of value arising from the accomplishment or expectation of the Merger.” In Cede & Co. v. Technicolor, Inc., the Delaware Supreme Court stated that such exclusion is a “narrow exclusion [that] does not encompass known elements of value,” but which rather applies only to the speculative elements of value arising from such accomplishment or expectation. In Weinberger, the Supreme Court of Delaware also stated that “elements of future value, including the nature of the enterprise, which are known or susceptible of proof as of the date of the Merger and not the product of speculation, may be considered.” In addition, the Delaware courts have decided that the statutory appraisal remedy, depending on factual circumstances, may or may not be a dissenting stockholder’s exclusive remedy.
Stockholders considering seeking appraisal should be aware that the fair value of their shares as so determined by the Delaware Court of Chancery could be more than, the same as or less than the consideration they would receive pursuant to the Merger if they did not seek appraisal of their shares and that an opinion of an investment banking firm as to the fairness from a financial point of view of the consideration payable in a Merger is not an opinion as to, and does not in any manner address, fair value under Section 262. No representation is made as to the outcome of the appraisal of fair value as determined by the Delaware Court of Chancery, and stockholders should recognize that such an appraisal could result in a determination of a value higher or lower than, or the same as, the Merger Consideration. Neither Grace nor Parent anticipates offering more than the Merger Consideration to any stockholder exercising appraisal rights, and each of Grace and Parent reserves the rights to make a voluntary cash payment pursuant to subsection (h) of Section 262 and to assert, in any appraisal proceeding, that for purposes of Section 262, the “fair value” of a share of Grace common stock is less than the Merger Consideration. If a petition for appraisal is not timely filed, or if neither of the ownership thresholds described above has been satisfied as to stockholders seeking appraisal rights, then the right to an appraisal will cease. The costs of the appraisal proceedings (which do not include attorneys’ fees or the fees and expenses of experts) may be determined by the Delaware Court of Chancery and charged upon the parties as the Delaware Court of Chancery deems equitable under the circumstances. Upon application of a stockholder, the Delaware Court of Chancery may also order that all or a portion of the expenses incurred by a stockholder in connection with an appraisal proceeding, including, without limitation, reasonable attorneys’ fees and the fees and expenses of experts, be charged pro rata against the value of all the shares entitled to be appraised. In the absence of such determination or assessment, each party bears its own expenses.
If any stockholder who demands appraisal of his, her or its shares of Grace common stock under Section 262 fails to perfect, or effectively loses or withdraws, such holder’s right to appraisal, the stockholder’s
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shares of Grace common stock will be deemed to have been converted at the Effective Time into the right to receive the Merger Consideration. A stockholder will fail to perfect, or effectively lose or withdraw, the holder’s right to appraisal if no petition for appraisal is filed within 120 days after the Effective Time, if neither of the ownership thresholds described above has been satisfied as to stockholders seeking appraisal rights or if the stockholder delivers to the Surviving Corporation a written withdrawal of the holder’s demand for appraisal and an acceptance of the Merger Consideration in accordance with Section 262.
From and after the Effective Time, no stockholder who has demanded appraisal rights will be entitled to vote such shares of Grace common stock for any purpose or to receive payment of dividends or other distributions on the stock, except dividends or other distributions on the holder’s shares of Grace common stock, if any, payable to stockholders as of a time prior to the Effective Time. If no petition for an appraisal is filed, if neither of the ownership thresholds described above has been satisfied as to the stockholders seeking appraisal rights, or if the stockholder delivers to the Surviving Corporation a written withdrawal of the demand for an appraisal and an acceptance of the Merger, either within 60 days after the Effective Time or thereafter with the written approval of the Surviving Corporation, then the right of such stockholder to an appraisal will cease. Once a petition for appraisal is filed with the Delaware Court of Chancery, however, the appraisal proceeding may not be dismissed as to any stockholder without the approval of the court, and such approval may be conditioned upon such terms as the court deems just; provided, however, that the foregoing will not affect the right of any stockholder who has not commenced an appraisal proceeding or joined that proceeding as a named party to withdraw such stockholder’s demand for appraisal and to accept the terms offered upon the Merger within 60 days after the Effective Time.
Failure to comply strictly with all of the procedures set forth therein. in Section 262 may result in the loss of a stockholder’s statutory appraisal rights. Consequently, any stockholder wishing to exercise appraisal rights is encouraged to consult legal counsel before attempting to exercise those rights.
The foregoingfollowing discussion is a summary of certain material U.S. federal income tax consequences of the Merger that may be relevant to U.S. Holders (as defined below) of shares of Grace common stock whose shares are converted into the right to receive cash pursuant to the Merger. This discussion is limited to Grace Stockholders who hold their shares of Grace common stock as “capital assets” within the meaning of Section 1221 of the Code (generally, property held for investment purposes). This discussion is based upon the Code, Treasury Regulations promulgated under the Code, rulings and other published positions of the Internal Revenue Service (the “IRS”) and judicial decisions, all as in effect on the date of this proxy statement and all of which are subject to change or differing interpretations at any time, possibly with retroactive effect. Any such change or differing interpretation could affect the accuracy of the statements and conclusions set forth in this discussion. No assurance can be given that the IRS would not assert, or that a court would not sustain, a position contrary to any of the tax considerations described in this discussion. No advance ruling has been or will be sought from the IRS regarding any matter discussed below.
This discussion is for general information purposes only and does not purport to be a complete analysis of all of the U.S. federal income tax considerations that may be relevant to particular holders in light of their particular facts and circumstances, or to Grace Stockholders subject to special rules under the U.S. federal income tax laws, including, for example, but not limited to:
banks and other financial institutions;
mutual funds;
insurance companies;
brokers or dealers in securities, currencies or commodities;
dealers or traders in securities subject to a mark-to-market method of accounting with respect to shares of Grace common stock (by vote or value);
regulated investment companies and real estate investment trusts;
retirement plans, individual retirement and other deferred accounts;
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tax-exempt organizations, governmental agencies, instrumentalities or other governmental organizations and pension funds;
holders that are holding shares of Grace common stock as part of a “straddle,” hedge, constructive sale, or other integrated transaction or conversion transaction or similar transactions;
U.S. Holders whose functional currency is not the U.S. dollar;
partnerships, other entities classified as partnerships for U.S. federal income tax purposes, “S corporations,” or any other pass-through entities for U.S. federal income tax purposes (or investors in such entities);
expatriated entities subject to Section 7874 of the Code;
holders that are required to accelerate the recognition of any item of gross income as a result of such income being recognized on an “applicable financial statement”;
persons subject to the alternative minimum tax;
U.S. expatriates and former citizens or long-term residents of the United States;
grantor trusts;
controlled foreign corporations, passive foreign investment companies, and corporations that accumulate earnings to avoid U.S. federal income tax;
holders that received their shares of Grace common stock in a compensatory transaction, through a tax qualified retirement plan or pursuant to the exercise of options or warrants;
holders that own an equity interest in Parent following the Merger;
holders that hold their Grace common stock through a bank, financial institution or other entity, or a branch thereof, located, organized or resident outside the United States;
holders that own or have owned (directly, indirectly or constructively) five (5) percent or more of Grace common stock (by vote or value);
holders that are not U.S. Holders; and
holders that do not vote in favor of the Merger and that properly demand appraisal of their shares under Section 262 of the DGCL.
This discussion does not address any U.S. federal tax considerations other than those pertaining to the income tax (such as estate, gift or other non-income tax consequences) or any state, local or foreign income or non-income tax considerations. In addition, this discussion does not address any considerations arising under the unearned income Medicare contribution tax pursuant to the Health Care and Education Reconciliation Act of 2010, or any considerations in respect of any withholding required pursuant to the Foreign Account Tax Compliance Act of 2010 (including the Treasury Regulations promulgated thereunder and intergovernmental agreements entered into in connection therewith and any laws, regulations or practices adopted in connection with any such agreement).
If a partnership (including an entity or arrangement, domestic or non-U.S., treated as a partnership for U.S. federal income tax purposes) is a beneficial owner of shares of Grace common stock, the U.S. federal income tax treatment of a partner in such partnership generally will depend upon the status of the partner, the activities of the partner and the partnership and certain determinations made at the partner level. Accordingly, partners in partnerships holding shares of Grace common stock should consult their tax advisors as to the particular tax consequences to them of the Merger.
THE U.S. FEDERAL INCOME TAX TREATMENT OF THE TRANSACTIONS DISCUSSED HEREIN TO ANY PARTICULAR STOCKHOLDER WILL DEPEND ON THE STOCKHOLDER’S PARTICULAR TAX CIRCUMSTANCES. WE URGE YOU TO CONSULT YOUR TAX ADVISOR WITH RESPECT TO THE SPECIFIC TAX CONSEQUENCES TO YOU IN CONNECTION WITH THE MERGER IN LIGHT OF YOUR OWN PARTICULAR CIRCUMSTANCES, INCLUDING U.S. FEDERAL, STATE, LOCAL AND NON-U.S. INCOME AND OTHER TAX CONSEQUENCES.
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This section applies to “U.S. Holders.” For purposes of this discussion, a “U.S. Holder” means a beneficial owner of shares of Grace common stock that is for U.S. federal income tax purposes:
an individual who is a citizen or resident of the United States;
a corporation, or other entity taxable as a corporation for U.S. federal income tax purposes, created or organized in or under the laws of the United States or any state thereof or the District of Columbia;
an estate, the income of which is subject to U.S. federal income taxation regardless of its source; or
a trust, if (i) a court within the United States is able to exercise primary supervision over the administration of such trust and one (1) or more “United States persons” (within the meaning of the Code) have the authority to control all substantial decisions of the trust or (ii) the trust validly elected to be treated as a United States person for U.S. federal income tax purposes.
The receipt of cash by a U.S. Holder in exchange for shares of Grace common stock pursuant to the Merger will be a taxable transaction for U.S. federal income tax purposes. In general, a U.S. Holder will recognize capital gain or loss in an amount equal to the difference, if any, between the amount of cash received and the U.S. Holder’s adjusted tax basis in the shares of Grace common stock surrendered pursuant to the Merger. A U.S. Holder’s adjusted tax basis generally will equal the amount that such U.S. Holder paid for the shares of Grace common stock. A U.S. Holder’s gain or loss on the disposition of shares of Grace common stock generally will be characterized as capital gain or loss. Any such gain or loss will be long-term capital gain or loss if such U.S. Holder’s holding period in such shares is more than one (1) year on the date of the Merger. A preferential tax rate on capital gain generally will apply to long-term capital gain of a non-corporate U.S. Holder (including individuals). The deductibility of capital losses is subject to limitations. U.S. Holders who hold different blocks of Grace common stock (shares of Grace common stock purchased or acquired on different dates or at different prices) should consult their tax advisor to determine how the above rules apply to them.
Information Reporting and Backup Withholding
Generally, information reporting requirements may apply in connection with payments made to U.S. Holders in connection with the Merger.
Backup withholding (currently, at a rate of 24%) generally will apply to the proceeds received by a U.S. Holder pursuant to the Merger, unless the U.S. Holder provides the applicable withholding agent with a properly completed and executed IRS Form W-9 providing such U.S. Holder’s correct taxpayer identification number and certifying that such holder is not subject to backup withholding, or otherwise establishes an exemption, and otherwise complies with the backup withholding rules.
Backup withholding is not an additional tax. The amount of any backup withholding from a payment to a U.S. Holder generally will be allowed as a credit against such holder’s U.S. federal income tax liability, if any, and may entitle such holder to a refund, provided that the required information is timely furnished to the IRS.
THE DISCUSSION ABOVE IS BASED ON CURRENT LAW. LEGISLATIVE, ADMINISTRATIVE OR JUDICIAL CHANGES OR INTERPRETATIONS, WHICH CAN APPLY RETROACTIVELY, COULD AFFECT THE ACCURACY OF THE STATEMENTS SET FORTH THEREIN. THIS DISCUSSION IS FOR GENERAL INFORMATION PURPOSES ONLY. IT DOES NOT ADDRESS TAX CONSIDERATIONS THAT MAY VARY WITH, OR ARE CONTINGENT ON, YOUR INDIVIDUAL CIRCUMSTANCES OR THE APPLICATION OF ANY U.S. NON-INCOME TAX LAWS OR THE LAWS OF ANY STATE, LOCAL OR NON-U.S. JURISDICTION AND HOLDERS ARE URGED TO CONSULT THEIR TAX ADVISORS REGARDING SUCH MATTERS AND THE TAX CONSEQUENCES OF THE MERGER TO THEM IN LIGHT OF THEIR PARTICULAR CIRCUMSTANCES.
General
Grace and Parent have agreed to take all actions necessary or advisable to comply with all regulatory notification requirements and, subject to certain limitations, to obtain all regulatory approvals required to consummate the Merger and the other transactions contemplated by the Merger Agreement. These approvals include approval under the HSR Act and the antitrust laws of certain specified foreign jurisdictions.
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HSR Act and U.S. Antitrust Matters
Under the HSR Act and the rules promulgated thereunder, the Merger may not be completed until Grace and Parent each files a Notification and Report Form with the Antitrust Division of the U.S. Department of Justice (“DOJ”) and the Federal Trade Commission (“FTC”), and the applicable waiting period has expired or been terminated. A transaction notifiable under the HSR Act may not be completed until the expiration of a 30-calendar-day waiting period following the parties’ filings of their respective HSR Act notification and report forms or the early termination of that waiting period. If the FTC or the DOJ issues a request for additional information and documents (which we refer to as the “Second Request”) prior to the expiration of the initial waiting period, the parties must observe a second 30-day waiting period, which would begin to run only after both parties have substantially complied with the Second Request, unless the waiting period is terminated earlier or the parties otherwise agree to extend the waiting period.
Grace and Parent each filed a Notification and Report Form with respect to the Merger with the FTC and the DOJ on May 10, 2021.
At any time before or after consummation of the Merger, notwithstanding the termination or expiration of the waiting period under the HSR Act, the FTC or the DOJ could take such action under the antitrust laws as it deems necessary or desirable in the public interest, including seeking to enjoin the completion of the Merger, seeking divestiture of substantial assets of the parties, or requiring the parties to license or hold separate assets or terminate existing relationships and contractual rights. At any time before or after the completion of the Merger, any state could take such action under the antitrust laws as it deems necessary or desirable in the public interest. Such action could include seeking to enjoin the completion of the Merger or seeking divestiture of substantial assets of the parties. Private parties may also seek to take legal action under the antitrust laws under certain circumstances. We cannot be certain that a challenge to the Merger will not be made or that, if a challenge is made, we will prevail.
Other Regulatory Approvals
The Merger is also subject to clearance or approval by the antitrust authorities in certain specified foreign jurisdictions. The Merger cannot be completed until Grace and Parent obtain approval, consent, waiver or clearance to consummate the Merger or the applicable waiting periods have expired or been terminated in such jurisdictions.
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The following summary describes the material provisions of the Merger Agreement. The descriptions of the LetterMerger Agreement in this summary and the Confidentiality Agreement doelsewhere in this proxy statement are not purport to be complete and are qualified in their entirety by reference to the full textMerger Agreement, a copy of which is attached to this proxy statement as Annex A and incorporated into this proxy statement by reference. You should carefully read and consider the entire Merger Agreement, which is the legal document that governs the Merger, because this summary may not contain all the information about the Merger Agreement that is important to you. The rights and obligations of the Letterparties are governed by the express terms of the Merger Agreement and not by this summary or any other information contained in this proxy statement.
The representations, warranties, covenants and agreements described below and included in the Merger Agreement (i) were made only for purposes of the Merger Agreement and as of specific dates; (ii) were made solely for the benefit of the parties to the Merger Agreement; and (iii) may be subject to important qualifications, limitations and supplemental information agreed to by Grace, Parent and Merger Sub in connection with negotiating the terms of the Merger Agreement. In addition, the representations and warranties have been included in the Merger Agreement for the purpose of allocating contractual risk between Grace, Parent and Merger Sub rather than to establish matters as facts, and may be subject to standards of materiality applicable to such parties that differ from those applicable to investors. Stockholders are not third-party beneficiaries under the Merger Agreement and should not rely on the representations, warranties, covenants and agreements or any descriptions thereof as characterizations of the actual state of facts or condition of Grace, Parent or Merger Sub or any of their respective affiliates or businesses. Moreover, information concerning the subject matter of the representations and warranties may change after the date of the Merger Agreement. In addition, you should not rely on the covenants in the Merger Agreement as actual limitations on the respective businesses of Grace, Parent and Merger Sub, because the parties may take certain actions that are either expressly permitted in the confidential disclosure schedules to the Merger Agreement or as otherwise consented to by the appropriate party, which weconsent may be given without prior notice to the public. The Merger Agreement is described below, and included as Annex A, only to provide you with information regarding its terms and conditions, and not to provide any other factual information regarding Grace, Parent, Merger Sub or their respective businesses. Accordingly, the representations, warranties, covenants and other agreements in the Merger Agreement should not be read alone, and you should read the information provided elsewhere in this document and in our filings with the SEC regarding Grace and our business.
The Merger Agreement provides that, subject to the terms and conditions of the Merger Agreement, and in accordance with the DGCL, at the Effective Time: (i) Merger Sub will be merged with and into Grace, with Grace becoming a wholly owned subsidiary of Parent; (ii) the separate corporate existence of Merger Sub will thereupon cease; and (iii) Grace will continue as the Surviving Corporation. From and after the Effective Time, the Surviving Corporation will possess all property, rights, privileges, powers and franchises of Grace and Merger Sub, and all of the debts, liabilities and duties of Grace and Merger Sub will become the debts, liabilities and duties of the Surviving Corporation.
At the Effective Time, the certificate of incorporation of the Surviving Corporation will be amended and restated to be the same as the certificate of incorporation of Merger Sub as in effect immediately prior to the Effective Time, except that the name of the Surviving Corporation will be “W. R. Grace & Co.” At the Effective Time, the bylaws of the Surviving Corporation will be amended and restated to the same as the bylaws of Merger Sub as in effect immediately prior to the Effective Time, except that the name of the Surviving Corporation will be “W. R. Grace & Co.”
The individuals holding positions as directors of Merger Sub immediately prior to the Effective Time will become the initial directors of the Surviving Corporation. The individuals holding positions as officers of Grace immediately prior to the Effective Time will become the initial officers of the Surviving Corporation.
The closing of the Merger will take place (i) at 10:00 a.m., New York City time, on the third (3rd) business day following the satisfaction or waiver of all conditions to closing of the Merger (described below under the caption, “—Conditions to the Closing of the Merger”) (other than conditions that by their terms are to be
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satisfied at the closing but subject to the satisfaction or waiver of such conditions at such time, and subject to the sentence that immediately follows), or (ii) at another date and time mutually agreed upon in writing between Grace and Parent. However, if the Marketing Period has not concluded at the time of the satisfaction or waiver of all conditions to closing of the Merger (other than those conditions to be satisfied at the closing of the Merger), the closing of the Merger will then occur on the date that is the earliest of (a) any business day during such Marketing Period specified by Parent to Grace on no fewer than three (3) business days’ notice to Grace and (b) the third (3rd) business day after the final day of such Marketing Period (subject in each case to the satisfaction or waiver of all of the conditions to the closing of the Merger set forth in the Merger Agreement at or prior to such time (other than those conditions that by their terms are to be satisfied at the closing, but subject to the satisfaction or waiver of those conditions at such time)). The date on which the closing of the Merger occurs is herein referred to as the “Closing Date.” On the Closing Date, the parties will file a certificate of merger with the Secretary of State for the State of Delaware as provided under the DGCL. The time at which the Merger will become effective will occur at the Effective Time.
Grace common stock
At the Effective Time, and without any action required by any stockholder, each share of Grace common stock (other than Excluded Shares, which include, for example, shares of Grace common stock owned by stockholders who have properly and validly exercised their statutory rights of appraisal under Section 262 of the DGCL) outstanding as of immediately prior to the Effective Time will be cancelled and retired and automatically converted into the right to receive the Merger Consideration, without interest and less any applicable withholding taxes.
Treatment of Company Equity Awards
Treatment of Company Options and Company SARs. The Merger Agreement provides that each Company Option and each Company SAR that is outstanding immediately prior to the Effective Time will vest at closing and be converted into the right to receive an amount in cash equal to the product of Merger Consideration (less the applicable exercise price) and the number of shares of Common Stock covered by such Company Option or Company SAR (without interest and less applicable withholding taxes). Payment of these cash amounts will be paid within three (3) business days after the Effective Time. Any Company Option or Company SAR that has a per share exercise price that is greater than or equal to the Merger Consideration will be cancelled at the Effective Time for no consideration or payment.
Treatment of Company RSU Awards and Company Performance Share Awards. The Merger Agreement provides that each Company RSU Award and each Company Performance Share Award that is outstanding immediately prior to the Effective Time will be assumed and converted into the right to receive an amount in cash (without interest) equal to the product obtained by multiplying the Merger Consideration by the number of shares of Common Stock covered by such award immediately prior to the Effective Time, which converted cash award will be subject to continued service vesting and other terms as set forth in the Merger Agreement.
Prior to the Effective Time, Parent and Grace will mutually agree upon, and Parent will appoint, a bank or trust company to act as paying agent to make payments of the Merger Consideration to Grace Stockholders. Prior to the Effective Time, Parent will deposit (or cause to be deposited) with the paying agent, in trust for the benefit of holders of Grace common stock, cash sufficient to pay the aggregate Merger Consideration.
Promptly (but no later than two (2) business days) after the Effective Time, Parent will cause the paying agent to mail to each holder of record of a certificate that immediately prior to the Effective Time represented outstanding shares of Grace common stock (other than Excluded Shares) (i) a letter of transmittal and (ii) instructions for effecting the surrender of such certificates to the paying agent in exchange for payment of the Merger Consideration (without interest and subject to required withholding taxes). Upon surrender to the paying agent of certificates, together with the letter of transmittal, duly completed and validly executed in accordance with the instructions, and such other documents as may reasonably be required, the holder of such certificates will be entitled to receive payment of the Merger Consideration which the holder is entitled to pursuant to the Merger Agreement in respect of each share formerly represented by such certificate (without interest and after giving effect to any required tax withholding).
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No holder of book-entry shares of Grace common stock will be required to deliver a certificate or letter of transmittal to the paying agent to receive the Merger Consideration (without interest and subject to required withholding taxes). In lieu thereof, the registered holder of each book-entry share of Grace common stock will automatically upon the Effective Time be entitled to receive, and Parent will cause the paying agent to pay and deliver in exchange therefor as promptly as reasonably practicable, the Merger Consideration (without interest and after giving effect to any required tax withholding).
If any cash deposited with the paying agent is not claimed within one (1) year following the Effective Time, such cash will be returned to the Surviving Corporation, upon demand, and any holders of Grace common stock who have not complied with the exchange procedures in the Merger Agreement may thereafter look only to the Surviving Corporation and Parent for payment of the Merger Consideration (without interest and after giving effect to any required tax withholding).
The Merger Agreement contains representations and warranties of Grace, Parent and Merger Sub.
Some of the representations and warranties in the Merger Agreement made by Grace are qualified as to “materiality” or “Company Material Adverse Effect.” For purposes of the Merger Agreement, “Company Material Adverse Effect” means any fact, circumstance, effect, change, event or development that, individually or in the aggregate, has or would reasonably be expected to have a material adverse effect on the business, properties, assets, liabilities, financial condition or results of operations of Grace and its subsidiaries, taken as a whole, except that no fact, circumstance, effect, change, event or development resulting from or arising out of any of the following, individually or in the aggregate, will constitute or be taken into account when determining whether a Company Material Adverse Effect has occurred:
any change generally affecting the industries in which Grace and its subsidiaries operate in the United States or elsewhere (including changes in commodity prices or general market prices generally affecting such industries and changes in the global demand environment generally affecting such industries);
any change generally affecting any economic, legislative or political condition (including trade wars and sanctions) or any change generally affecting any securities, credit, financial, commodities or capital markets condition, in each case in the United States or elsewhere;
any failure in and of itself by Grace or any of its subsidiaries to meet any internal or public projection, budget, forecast, estimate or prediction in respect of revenues, earnings or other financial or operating metrics or measures for any period (provided that the changes and effects giving rise to or contributing to such failure may (to the extent not otherwise excluded by the definition of Company Material Adverse Effect) constitute or be taken into account in determining whether a Company Material Adverse Effect has occurred);
any change resulting from the announcement, execution or delivery of the Merger Agreement, including (i) the failure of Grace or its subsidiaries to take any action if Parent’s prior consent is required hereunder and Parent unreasonably withholds consent to taking of such action after receipt of the written request therefor from Grace; (ii) any stockholder litigation related to the Merger Agreement or the transactions contemplated by the Merger Agreement (but not any finally adjudicated breach of fiduciary duty or any violation of law itself); (iii) any action taken by Parent or any affiliate thereof to obtain any required statutory approval from any governmental entity or satisfy any condition to the consummation of the Merger and the result of such actions; (iv) any change to the extent that arises out of or relates to the identity of Parent or any of its affiliates as the acquirer of Grace; or (v) the impact of the announcement, execution or delivery on relationships with employees and labor unions, customers, suppliers, distributors, governmental entities and other persons (provided that this bullet will not apply with respect to Grace’s representations or warranties regarding required consents, approvals and regulatory filings in connection with the Merger Agreement and performance thereof and the absence of certain violations (or any condition to any party’s obligation to consummate the Merger relating to such representation and warranty));
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any change in the market price or trading volume of shares of Grace common stock on the NYSE (provided that the changes and effects giving rise to or contributing to any such change may (if not otherwise excluded by the definition of Company Material Adverse Effect) constitute or be taken into account in determining whether a Company Material Adverse Effect has occurred);
any change in applicable law, regulation or GAAP (or authoritative interpretation thereof);
any applicable quarantine, “shelter in place,” “stay at home,” workforce reduction, social distancing, shut down, closure, sequester, safety or similar laws, promulgated by any governmental entity, including the Centers for Disease Control and Prevention and the World Health Organization, in each case, in connection with or in response to COVID-19 (“COVID-19 Measures”);
any geopolitical conditions, the outbreak or escalation of hostilities, any act of war, sabotage or purported terrorism, or any escalation or worsening of any such act of war, sabotage or purported terrorism;
any change or effect arising from any hurricane, strong winds, ice event, fire, tornado, tsunami, flood, earthquake, pandemics (including SARS-CoV-2 or COVID-19, any evolutions or mutations thereof or related or associated epidemics, pandemics or disease outbreaks (“COVID-19”)), epidemics or other outbreaks of diseases, or other natural disaster or extreme weather-related event, circumstance or development (or escalation or worsening of any such events or occurrences, including, as applicable, second or subsequent wave(s));
any change or effect arising from any requirements imposed by any governmental entity as a condition to obtaining the required statutory approvals;
except that any fact, circumstance, effect, change, event or development set forth in bullets 1, 2, 6, 8 and 9 above may be taken into account to the extent that such change or effect has a disproportionate adverse effect on Grace and its subsidiaries, taken as a whole, as compared to other participants in the industries in which Grace and its subsidiaries operate (in which case only the incremental disproportionate impact may be taken into account in determining whether there has been, or would be, a Company Material Adverse Effect).
In the Merger Agreement, Grace has made customary representations and warranties to Parent and Merger Sub that are subject, in some cases, to specified exceptions and qualifications contained in the Merger Agreement. These representations and warranties relate to, among other things:
due organization, valid existence, good standing and power to do business;
subsidiaries;
capitalization;
corporate power and authority relating to execution, delivery and performance of the Merger Agreement;
required consents, approvals and regulatory filings in connection with the Merger Agreement and performance thereof and the absence of certain violations;
the reports, schedules, forms, statements and other documents required to be furnished or filed with the SEC, on February 28, 2019, as Exhibit 10.22 to our Annual Report on Form 10-K for the fiscal year ended December 31, 2018.
| Fee Description | 2018* | 2017 | ||||||
| Audit Fees | $ | 3,223,000 | $ | 2,563,000 | ||||
| Audit-Related Fees | 59,000 | — | ||||||
| Tax Fees | 718,000 | 489,000 | ||||||
| All Other Fees | 7,000 | 26,000 | ||||||
| Total Fees | $ | 4,007,000 | $ | 3,078,000 | ||||
the absence of certain changes or events;
tax matters;
employee benefit plans and other agreements, plans and policies with or concerning employees;
labor matters;
litigation;
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compliance with applicable laws and validity of permits;
compliance with applicable anti-bribery, anti-corruption and anti-money laundering laws;
compliance with applicable economic sanctions and export control laws;
the inapplicability of takeover statutes to the Merger and the absence of anti-takeover agreements and plans;
environmental matters;
material contracts;
real property matters;
intellectual property, information technology assets and data privacy;
suppliers and customers;
insurance matters;
product warranties;
product liability;
affiliate party transactions;
brokers’ fees and expenses; and
the opinions of Grace’s financial advisors.
In the Merger Agreement, Parent and Merger Sub have made customary representations and warranties to Grace that are subject, in some cases, to specified exceptions and qualifications contained in the Merger Agreement. These representations and warranties relate to, among other things:
due organization, valid existence, good standing and power to do business;
power and authority relating to execution, delivery and performance of the Sarbanes-Oxley ActMerger Agreement;
consents and approvals relating to the execution, delivery and performance of 2002); the reviewsMerger Agreement and the absence of our consolidated quarterly financial statements; services that are normally providedcertain violations;
litigation;
compliance with applicable laws;
the executed Equity Commitment Letter and Debt Commitment Letter providing for a commitment to provide Equity Financing and Debt Financing, respectively, to Parent, and the sufficiency of the proceeds to be disbursed under the Commitment Letters, together with other sources of financing available to Parent, to pay the aggregate Merger Consideration and the other amounts payable under the Merger Agreement, and the enforceability of the Commitment Letters;
the limited guaranty delivered by the independent registered public accounting firm in connection with statutory and regulatory filings or engagements; servicesGuarantor guaranteeing certain obligations of Parent in connection with the implementationMerger Agreement;
brokers’ fees and expenses;
capitalization of new accountingMerger Sub;
the absence of any required consent of shareholders of Parent and the sufficiency of Parent’s vote, as sole stockholder of Merger Sub, on behalf of Merger Sub;
the absence of beneficial ownership of Grace common stock by Parent and its subsidiaries and affiliates, except as publicly disclosed prior to the date of the Merger Agreement;
the solvency of Parent and its subsidiaries as of the Effective Time and immediately after giving effect to the transactions contemplated by the Merger Agreement; and
the absence of certain arrangements between the Parent or financial standards;Merger Sub, on the one hand, and consentsany (i) director or officer of Grace relating to Grace or any of its businesses or subsidiaries or (ii) any other stockholder of Grace, on the other hand.
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Some of the representations and assistancewarranties in the Merger Agreement made by Parent and Merger Sub are qualified as to “materiality” or “Parent Material Adverse Effect.” For purposes of the Merger Agreement, “Parent Material Adverse Effect” means any fact, circumstance, effect, change, event or development that, individually or in the aggregate, would reasonably be expected to prevent Parent’s or Merger Sub’s consummation of the transactions contemplated by the Merger Agreement prior to the End Date.
The representations and warranties contained in the Merger Agreement will not survive the consummation of the Merger.
The Merger Agreement provides that, except: (i) for matters set forth in the confidential disclosure schedules to the Merger Agreement, (ii) as required or expressly contemplated by the Merger Agreement; (iii) as mandated by a governmental entity or required by applicable law; (iv) for any actions that Grace reasonably determines are necessary to comply with COVID-19 Measures or to respond to COVID-19 in a manner consistent with past practice, except that, prior to taking any actions pursuant to such clause (iv) which would otherwise be prohibited by the Merger Agreement, Grace must use commercially reasonable efforts to provide advance notice to and consult with Parent (if reasonably practicable) with respect thereto; or (v) with the prior written consent of Parent (which consent will not be unreasonably withheld, conditioned or delayed, and which consent will be deemed to our SEC filings.have been given if Parent does not respond within five (5) business days (subject to extension if Parent requests additional information, in which case Parent will have three (3) business days to provide a decision after Grace furnishes the requested information)), during the period of time between the date of the signing of the Merger Agreement and the first to occur of the Effective Time and the termination of the Merger Agreement (the “Interim Period”), Grace will and will cause each of its subsidiaries to:
use commercially reasonable efforts to preserve intact its current business organization and goodwill and to preserve its relationship with employees, customers, suppliers, licensors, licensees, distributors, lessors and others having material business dealings with Grace or its subsidiaries.
In addition, Grace has also agreed that, are reasonably relatedexcept: (i) for matters set forth in the confidential disclosure schedules to the performanceMerger Agreement; (ii) as required or expressly contemplated by the Merger Agreement; (iii) as mandated by a governmental entity or required by applicable law; (iv) for any actions that Grace reasonably determines are necessary to comply with COVID-19 Measures or to respond to COVID-19 in a manner consistent with past practice, except that, prior to taking any actions pursuant to such clause (iv) which would otherwise be prohibited by the Merger Agreement, Grace must use commercially reasonable efforts to provide advance notice to and consult with Parent (if reasonably practicable) with respect thereto; or (v) with the prior written consent of Parent (which consent will not be unreasonably withheld, conditioned or delayed, and which consent will be deemed to have been given if Parent does not respond within five (5) business days (subject to extension if Parent requests additional information, in which case Parent will have three (3) business days to provide a decision after Grace furnishes the requested information)), during the Interim Period, Grace will not, and will cause each of its subsidiaries not to, among other things (and subject to certain exceptions):
declare, set aside or pay any dividend or make any other distribution in respect of any of its capital stock, equity interests or other voting securities;
amend any of Grace’s organizational documents;
other than in the case of wholly owned subsidiaries, split, combine, consolidate, subdivide, or reclassify the capital stock of Grace, or issue or authorize the issuance of any other securities in respect of, in lieu of or in substitution for its capital stock, other equity interests or voting securities, except for any issuances of compensatory equity awards relating to Grace common stock in the ordinary course consistent with past practice (except that Grace may grant time-vesting restricted stock units in lieu of stock options and performance-based units) or issuances of Grace common stock pursuant to the due exercise, vesting and/or settlement of Company Equity Awards outstanding as of the audit or reviewdate of our consolidated financial statements and are not included under “Audit Services” above.the Merger Agreement in accordance with their terms;
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repurchase, redeem or acquire any capital stock or voting securities of Grace, other than (i) in connection with the Audit Committee to specifically preapprove the annual engagementexercise, vesting or settlement, as applicable, of Company Equity Awards outstanding as of the independent accountants for the audit of our consolidated financial statements and internal controls. The policy also provides for general preapproval of certain audit-related, tax and other services provided by the independent accountants. Any other services must be specifically preapproved by the Audit Committee. However, the Chairdate of the Audit Committee hasMerger Agreement or granted in accordance with the authorityMerger Agreement and (ii) transactions between Grace and its wholly owned subsidiaries or between Grace’s wholly owned subsidiaries;
grant to preapprove services requiring immediate engagement between scheduled meetings of the Audit Committee. The Chair must report any such preapproval decisionskey personnel any material increase in compensation or benefits, or grant to the full Audit Committee at its next scheduled meeting. During 2017 and 2018, no audit-related, tax, orall other services were performed by PwC without specific or general approval as described above. We have been advised by PwC that a substantial majority of the hours expended on their engagement for the 2018 audit of our consolidated financial statements and internal controls were attributed to work performed by PwC's full-time, permanent employees.
grant to any Grace personnel any new material rights to, or materially increase any existing rights to, change-in-control, severance, retention or termination pay;
enter into or materially amend any change-in-control, severance, retention or termination agreement with any key personnel or, for other Grace personnel, other than in the “Financial Statements”).ordinary course consistent with past practice;
take any action to accelerate the time of the following membersvesting, funding or payment of our Board: Mark E. Tomkins (Chair), Robert F. Cummings, Jr., Julie Fasone Holder, Diane H. Gulyas, Jeffry N. Quinn, Christopher J. Steffen and Shlomo Yanai. Each of the members of the Audit Committee is “independent," as definedany compensation or benefits under the NYSE’s listing standards and the rules and regulations of the Securities Exchange Act of 1934, as amended. The Audit Committee operates under a written charter adopted by our Board of Directors.any Grace benefit plan;
terminate the employment of any key personnel other than for cause;
make any material change in financial accounting methods, principles, policies or practices, except insofar as may be required by Auditing Standard No. 1301, Communications with Audit Committees, issuedapplicable law or GAAP or by any governmental entity (including the SEC or the Public Company Accounting Oversight Board.Board);
sell, assign, lease, license, encumber, divest, cancel, abandon, transfer, or otherwise dispose of any material intellectual property of Grace, other than the grant of non-exclusive licenses in the ordinary course of business;
redeem, repurchase or prepay (other than prepayment of revolving loans), or incur, assume, endorse, guarantee or otherwise become liable for or modify the terms of any indebtedness, excluding (i) indebtedness, guarantees and other credit support incurred in the ordinary course of business consistent with past practice or between Grace and its wholly owned subsidiaries or between its wholly owned subsidiaries, (ii) as reasonably necessary to finance any capital expenditures permitted under this section, (iii) as reasonably necessary to finance any acquisitions permitted under this section, (iv) indebtedness in replacement of, and on terms no less favorable in the aggregate to Grace than, existing indebtedness (subject to certain exceptions pursuant to this clause (iv) for indebtedness in excess of $100 million), (v) guarantees by Grace of existing indebtedness of any of its wholly owned subsidiaries and (vi) borrowings under existing revolving credit facilities (or replacements thereof on terms no less favorable in the aggregate to Grace) or existing commercial paper programs in the ordinary course of business;
other than in the ordinary course of business (including renewals consistent with the terms thereof) (i) modify or amend in any material respect, terminate, or waive any material right under, any material
