CEO Albert Costello got an earful at W.R. Grace's annual meeting on May 10 in Boca Raton, Fla. While hailing improved sales and pretax earnings, shareholders fumed over his refusal to discuss a merger between Grace and Hercules, a Wilmington (Del.) conglomerate. Hercules Chairman and former Grace director Thomas Gossage offered such a deal in March. "It doesn't cost to listen," shareholder Stewart Sunness told Costello.

Grace announced Gossage's resignation from the board after rejecting his proposal. Gossage has since publicly mulled a hostile bid for Grace, though he says he prefers a friendly deal. But Costello rejected the idea at the meeting, saying it would create no product synergies and that until Gossage names his price, there is nothing to discuss. "The only synergies with Hercules are cost synergies," said Costello, "and cost synergies are not enough."

Instead of discussing the Hercules bid, Costello said he believes Grace can deliver value on its own. He had better be right: Otherwise, he can expect far more pointed questions next year.

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