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Grace to Buy Dow Chemical Catalyst Unit for $500 Million

Oct. 11 (Bloomberg) -- W.R. Grace & Co., a manufacturer of catalysts used by oil refiners, agreed to buy Dow Chemical Co.’s polypropylene licensing and catalyst unit for $500 million to become the second-biggest producer of the technology.

The transaction should close by the end of the year, pending regulatory approvals, Columbia, Maryland-based Grace said in a statement today. The acquired business has 90 employees and includes a polypropylene-catalyst plant in Norco, Louisiana, customer contracts, licenses and inventory, Dow said today in a separate statement.

Grace, in Chapter 11 bankruptcy protection since April 2001, would become the second-largest producer of catalysts used to make polypropylene, a resin used in bottle caps, carpets and car bumpers, according to Laurence Alexander, a New York-based analyst at Jefferies Group LLC. It’s also Grace’s largest acquisition in 20 years, according to data compiled by Bloomberg.

Grace is paying about 10 times the unit’s $50 million in estimated earnings before interest, taxes, depreciation and amortization, Alexander, who recommends buying Grace shares and holding Dow, said in a note today. Specialty-chemical assets sold for an average 7.6 times Ebitda this year, according to Bloomberg data.

The purchase should boost Grace’s earnings per share by 11 cents next year and 20 cents in 2016, Alexander said. The deal shouldn’t alter Grace’s plan to buy back more than $1 billion of shares after emerging from bankruptcy, he said.

Shares Advance

Grace rose 2.5 percent to $90.26 at the close in New York. Midland, Michigan-based Dow added 1.7 percent to $41.07.

Dow, the largest U.S. chemicals company by sales, announced its intention to sell the unit in March as part of a plan to divest almost $1.5 billion of assets and focus on its most profitable operations. Dow in September announced it no longer plans to sell a plastics additives unit because bids were too low.

After today’s deal, Dow plans to sell the fumigants unit and other underperforming units worth a total of $1 billion by mid to late 2014, said Louise Adhikari, a company spokeswoman. She declined to name the other businesses that may be sold.

“Every business is being reviewed to meet the $1.5 billion number we committed to,” Adhikari said today by phone.

Even more asset sales may be coming. Dow in July said it may divest three businesses with $6 billion in combined revenue: epoxy, chlorine derivatives, and building and construction products outside of North America.

“We are planning further proactive divestments in the next 12 months,” Dow’s Chairman and Chief Executive Officer Andrew Liveris said today in his company’s statement.

Grace was advised on the deal by Blackstone Advisory Partners LP.

To contact the reporters on this story: Jack Kaskey in Houston at jkaskey@bloomberg.net; Gerrit De Vynck in Toronto at gdevynck@bloomberg.net

To contact the editor responsible for this story: Simon Casey at scasey4@bloomberg.net

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