W.R. Grace to Divest Health Care Division
W.R. Grace & Co. will spin off its health care unit to shareholders rather than sell it or accept merger proposals.
The specialty chemical and medical company said it rejected an informal merger bid for its National Medical Care Inc. unit from Vivra Inc., a rival kidney dialysis company, and a $3.5-billion purchase offer from the head of the unit.
Grace is transferring $1.4 billion of its $2-billion debt to National Medical Care as part of the transaction.
Boca Raton, Fla.-based Grace left the door open for a possible merger between the new kidney dialysis company, which will continue to be headed by Constantine (Gus) Hampers, and another concern.
“There is nothing to prevent Gus Hampers and his team, who are the industry leaders, from pursuing mergers that make sense after the spinoff,” Grace Chief Executive Albert Costello said.
The spinoff is expected to be completed in October or November, Grace spokeswoman Mary Lou Kromer said. The company plans to decide on share price later, she said.
Like Vivra, Ren Corp., another rival kidney dialysis company, has expressed interest in possibly making a merger bid for National Medical.
Some major institutional shareholders said Wednesday that they were satisfied with the Grace board’s decision to spin off the unit.
Grace, which will remain a chemical company, said it will adjust its dividend rate after the spinoff to a level comparable to that of its rivals. The new health care company will not pay a dividend to its shareholders, Grace said. The company’s quarterly dividend is 35 cents a share for a 2.2% annual yield.
As part of the spinoff, National Medical will have a stock option plan for its management consisting of 6.6% of the new company’s shares, as well as options that will replace their existing ones. Hampers had unsuccessfully sought 12% of the options for his managers.
Grace also said it hired Arthur Andersen & Co. to advise the company on reducing general and administrative expenses, as well as factory overhead. Company executives have previously said they might be able to cut up to $200 million in expenses. The cost-cutting recommendations are expected to be made within four months, though Costello said he will start reductions earlier.
Grace shares closed down 1 at 63 on Wednesday.
