Will the other shoe drop at W.R. Grace (GRA)? Some investors believe that once the chemical giant completes a long-awaited plan to sell its National Medical Care division, Grace may get swallowed by another outfit.

On Sept. 16, Grace shareholders will vote on the plan to merge National Medical with the dialysis unit of Germany's Fresenius. Each Grace holder would get American depositary receipts in Fresenius, a share of new Grace common stock, and a share of new preferred stock. Grace would receive $2.3 billion in cash, half of which would be used, says Grace, to retire debt and the other half to buy back shares.

This wad of cash could be tempting takeover bait. Because of the nature of the deal, Grace will have to buy shares on the open market, which will take some time. That, some analysts believe, makes Grace an enticing target.

Eyes are on Hercules, a specialty chemical producer, whose chairman, Thomas Gossage, resigned as a director of Grace in March after Grace rejected a proposal to merge Grace into Hercules. Gossage said he had been encouraged to explore such a merger by several large shareholders of both companies. Neither Hercules nor Grace will comment. Grace Chairman Albert Costello, in rebuffing the overture, has said that there are no business synergies to justify a combination. But that hasn't stopped the speculation. Grace's stock has been rising--from 61 in late July to 687/8 on Sept. 10. "It could be in Grace's best interests to do this transaction because Hercules has strong cash flow and Grace is in growth businesses that could use it," says one investor. "Within the first 30 days of the spin-off, it's very vulnerable," he adds.

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