As previously disclosed, on April 26, 2021, W. R. Grace & Co., a Delaware corporation (“Grace” or the “Company”), entered into an Agreement and Plan
of Merger (as amended from time to time, the “Merger Agreement”) with W. R. Grace Holdings LLC (fka Gibraltar Acquisition Holdings LLC), a Delaware limited liability company (“Parent”) and a wholly owned subsidiary of Standard Industries Holdings
Inc. (“Standard Industries Holdings”), and Gibraltar Merger Sub Inc., a Delaware corporation and a wholly owned subsidiary of Parent (“Merger Sub”), pursuant to which Merger Sub will merge with and into the Company (the “Merger”), with the Company
surviving the Merger as a wholly owned subsidiary of Parent.
In connection with the proposed Merger, Grace filed with the Securities and Exchange Commission (the “SEC”) a definitive proxy statement dated August 10,
2021 (the “Proxy Statement”), which Grace first mailed to their stockholders on or about August 11, 2021.
Following the announcement of the Merger Agreement, as of the date of this Current Report on Form 8-K, eight lawsuits challenging the Merger have been
filed. The lawsuits are captioned (i) Shiva Stein v. W. R. Grace & Co. et al. (Case No. 1:21-cv-4731), filed in the U.S. District Court for the Southern District of New York on May 26, 2021; (ii) Peter Ansay v. W. R. Grace & Co. et al. (Case No. 1:21-cv-03077), filed in the U.S. District Court for the
Eastern District of New York on May 29, 2021; (iii) Charles Bowles v. W. R. Grace & Co. et al. (Case No. 1:21-cv-04922), filed in the U.S. District Court for the Southern District of New York on June 3, 2021; (iv) Kathleen Finger v. W. R. Grace & Co. et al. (Case No. 5:21-cv-01055), filed in the U.S.
District Court for the Central District of California on June 23, 2021; (v) Alex Ciccotelli v. W. R. Grace & Co. et al. (Case No. 2:21-cv-02842), filed in the U.S. District Court for the Eastern District of Pennsylvania on June 25, 2021; (vi) Sam Carlisle v. W. R. Grace & Co. et al. (Case No.
1:21-cv-00965), filed in the U.S. District Court for the District of Delaware on June 30, 2021; (vii) Charlotte Bark v. W. R. Grace & Co. et al. (Case No. 1:21-cv-07054), filed in the U.S. District Court for the Southern District of New York on August 20, 2021;
and (viii) Jordan Wilson v. W. R. Grace &
Co. et al. (Case No. 1:21-cv-01264), filed in the U.S. District Court for the District of Delaware on September 2, 2021. The complaints filed in the lawsuits allege, among other things, that the defendants disseminated a materially
incomplete and misleading Proxy Statement relating to the proposed Merger in violation of Sections 14(a) and 20(a) of the Securities Exchange Act of 1934 and Rule 14a-9 promulgated thereunder. We refer to the eight lawsuits collectively as the
“Merger Litigation.”
Grace believes that the claims asserted in the Merger Litigation are without merit and supplemental disclosures are not required or necessary under
applicable laws. However, in order to avoid the risk that the Merger Litigation delays or otherwise adversely affects the Merger, and to minimize the costs, risks and uncertainties inherent in defending the lawsuits, and without admitting any
liability or wrongdoing, Grace has agreed to supplement the Proxy Statement as described in this Current Report on Form 8-K. Nothing in this Current Report on Form 8-K shall be deemed an admission of the legal necessity or materiality under
applicable laws of any of the disclosures set forth herein. To the contrary, Grace specifically denies all allegations in the Merger Litigation that any additional disclosure was or is required.
Supplemental Disclosures to Proxy Statement in Connection with the Merger Litigation
The additional disclosures (the “Supplemental Disclosures”) in this Current Report on Form 8-K supplement the disclosures contained in the Proxy
Statement and should be read in conjunction with the disclosures contained in the Proxy Statement, which should be read in its entirety. To the extent that information set forth in the Supplemental Disclosures differs from or updates information
contained in the Proxy Statement, the information in this Current Report on Form 8-K shall supersede or supplement the information contained in the Proxy Statement. All page references are to the Proxy Statement and terms used but not otherwise
defined herein shall have the meanings ascribed to such terms in the Proxy Statement.
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1.
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The disclosure in the third paragraph on page 33 of the Proxy Statement under the heading “Background of the Merger” is hereby
amended and restated as follows:
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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 which contained customary provisions, including a customary standstill provision that expired in February 2020, 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.
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2.
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The disclosure in the paragraph under the heading “Illustrative Discounted Cash Flow Analysis” beginning on page 52 and
continuing onto page 53 of the Proxy Statement is hereby amended and restated as follows:
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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 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 earnings before interest, taxes, depreciation
and amortization (“EBITDA”) for the terminal year of $824 million, 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 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 from Q1 2016 to Q2 2021. 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 of $2,273 million 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 of 67.1 million shares, 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.
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3.
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The disclosure on page 53 of the Proxy Statement under the heading “Illustrative Present Value of Future Share Price Analysis”
is hereby amended and restated as follows:
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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 (from Q1 2016 to Q2 2021) 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.
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4.
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The following disclosure is added after the second table on page 54 of the Proxy Statement under the heading “Selected
Transactions Analysis”:
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Acquirer
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Target
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EV / LTM EBITDA
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Cerberus / Koch
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PQ’s Performance Chemicals Business
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9.4x
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Grace
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Albemarle’s Fine Chemistry Services Business
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9.5
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Bain Capital / Cinven
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Lonza Specialty Ingredients
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13.0
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Ardian
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Angus Chemical Company
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13.1
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Lone Star
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BASF Construction Chemicals
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14.8
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Avient
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Clariant Masterbatches
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11.1
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Merck
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Versum
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14.3
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Parker-Hannifin
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LORD
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16.5
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Nippon
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Dulux
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16.1
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Sika
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Parex
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12.8
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Cabot Microelectronics
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KMG Chemicals
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13.2
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Messer / CVC
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Linde North America
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9.2
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Carlyle
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Specialty Chemicals Business of Akzo Nobel
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9.8
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Grace
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Albemarle Polyolefin Catalysts
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12.8
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Kuraray
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Calgon Carbon
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15.6
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H.B. Fuller
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Royal Adhesives
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11.4
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Houghton
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Quaker
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11.8
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Henkel
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Darex
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14.7
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Carlyle
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Atotech
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11.9
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BASF
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Chemetall
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15.3
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Evonik
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Air Products Performance Materials
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15.8
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Sherwin-Williams
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Valspar Corp
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16.3
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Air Liquide SA
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Airgas
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13.7
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Platform Specialty
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Alent plc
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13.1
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Solvay
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Cytec Industries
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14.8
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Apollo Global Management, LLC
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OM Group, Inc.
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11.4
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Tronox Limited
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FMC Corp’s Alkali Chemicals Business
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10.6
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5.
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The disclosure in the first paragraph under the heading “Premia Analysis” beginning on page 54 and continuing onto page 55 of
the Proxy Statement is hereby amended and restated as follows:
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Goldman Sachs reviewed and analyzed, using publicly available information, the acquisition premia for the 58 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.
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6.
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The disclosure in the last paragraph on page 55 of the Proxy Statement is hereby amended and restated as follows:
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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 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. During the two-year period ended April 26, 2021, Goldman Sachs has not recognized any compensation for financial advisory and/or underwriting services provided by its
Investment Banking Division to Parent, 40 North and their respective affiliates and portfolio companies. 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.
