Sohn Contest WR Grace

W.R. Grace Corporation (NYSE: GRA) Current Price (5/1/15): $97.50 Price Target: $137.30

Mitesh Amarthaluru (Duke ’17), Venkata Amarthaluru (Wharton ‘15, Engineering ‘15), Nicholas Liu (Wharton ‘15, Engineering ‘15), John Lu (Wharton ‘15, Engineering ‘15), Anubhav Maheshwari (Wharton ‘15, Engineering ‘15)   Video Pitch Link: http://tinyurl.com/WRGrace May 4th, 2015

I. Company Overview Business Description §  Industrials Company operating in catalyst technologies, materials technologies, and construction products §  Exited Chapter 11 on Feb. 3, 2014 after 13 years in bankruptcy due to asbestos litigation §  Management has announced plan to spin-off Grace’s construction products business in 2016 with New Grace retaining the catalysts technologies and materials technologies businesses §  Idea Generation: Circle of Competence à 1. Industrials Sector 2. Special Situations 3. Engineering Expertise Operating Segments §  Catalyst Technologies: Largest player (33% share) in oligopolistic industry with secular tailwinds §  Construction Products: 2nd largest player (8% share) for concrete admixtures industry, Largest player (18% share) for cement additives; industry fragmentation resulting from localized monopolies

Financials

2014 Revenue andBreakdown EBIT Breakdown 2012 Sales

Current  Price  

$97.50  

Market  Cap  

$7.0bn  

Enterprise  Value    

$8.5bn  

EBITDA  Margin  (2014)  

17.8%  

EV/TTM  Adj.  EBITDA  

11.2x  

EV/(EBITDA-­‐Capex)  

13.1x  

As of May 1st, 2015

2

II. Investment Thesis W.R. Grace is a recession-resistant cash compounder with clear paths to value realization. 1.  Grace operates in an oligopolistic industry with high barriers to entry, market share stability, and high ROIC levels. 2.  Grace maintains a deep competitive moat and recession resistant business due to customer captivity, specialized products, and technical expertise. 3.  Consensus mispricing exists in the marketplace because of Grace’s post-bankruptcy status, understatement of excess assets, and overlooked margin improvement potential. 4.  There are clear pathways to value realization from the upcoming spinoff, effective capital allocation, and increased investor transparency. Recommendation: Buy Grace stock pre-spin with the intention of selling Grace Construction Products stock following its spin-off in 2016 and hold New-Grace over at least a 3 year period to realize a projected asymmetric equity upside of 40.08%. SOTP Equity Value Cumulative Upside Value CAGR over 3 Years

$ 109.84 $ 12.06% 3.87% 3

137.30 40.08% 11.89%

III. Industry Overview: Catalyst Technologies Oligopoly with high barriers to entry § 

Pricing discipline in oligopoly § 

W.R. Grace is the market leader in an oligopolistic industry where the top 4 players have 89.2% market share

§ 

Catalyst technologies companies limit capacity expansion to 1-2% per year with a focus on value accretive pricing Increasing pricing allows a more effective EBITDA lift increasing volume

Capacity (thousand tons) (x) Utilization Volume Price ($/ton) Revenue Price Change EBIT Loss EBIT Margin

Barriers to Entry §  Economies of Scale: 45% of cost structure is fixed, providing high operating leverage §  Demand Side Barriers: Customer specific products create high switching costs §  Technology Barriers: Specialized technology with continued R&D investment necessary

Current Additional Sales Capacity 444.5 163.5 85.0% 85.0% 377.8 139.0 $3,300.0 $2,970.0 $1,246.8 $412.8 (10.0%) ($124.7) $124.7 30.2%

Price Decrease Additional Capacity Necessary

(10.0%) 36.8%

“Albemarle attempted volume competition in 2012-2013 unsuccessfully and recognizes importance of pricing discipline.” –Anonymous, Goldman Sachs Equity Research Analyst 4

III. Industry Overview: Catalyst Technologies Evidence of barriers to entry

Refining catalyst market share stability

1.  Market shares for oligopolistic players have shifted by less than 5% since 2010 2.  Adj. ROIC (5 year average) of 31.5% for Catalyst division consistently exceeds 8.5% cost of capital 3.  Value enhancing pricing industry structure where price is not sacrificed for market share increase

Operational Segment ROIC: Catalyst technologies outperformance

5

III. Industry Overview: Macro View W.R. Grace benefits when crude prices fall and experience limited effects when prices rise. Crude Price v. Refinery Utilization

GRA Sales v. Refinery Utilization

Crude Price v. GRA Sales

3 Year Avg. Correlation v. Time

1.  Compiled using US Energy Information Administration Statistics (LWC Estimates)

6

IV. Business Model: Competitive Advantages Customer Stability

Refinery

Products are non-substitutable to customers and small percentage of cost:(2) ›  Essential input for crude breakdown and specialized to customers ›  For refining catalysts, for barrel of oil refined, $0.15-$0.25 in catalyst cost ›  With total refinery cost of $4.75 per barrel, catalyst cost represents ~4.2% of total costs in the refinement process(3) ›  1% of cement producers costs are additives

1.  Source: The Catalyst Group 2.  Source: Anonymous, W.R. Grace Finance Manager 3.  PBF Energy May 2014 Presentation

Focus on core competencies has enabled Grace to become a market share leader in its products

Specialty

§ 

§ 

Long Standing Customer Relationships: ›  Extended 3 year contract life for catalysts ›  Customer renewal rate of 70% at contract completion(1) ›  Largest customers have specialized products and have worked with Grace for decades

Future

§ 

Leading Market Positions

WR Grace Market Position FCC HPC EB Resid HPC FB Resid HPC Distillate HPC Hydrocracking Polyethylene (PE) Catalyst PE Catalyst Support Polypropylene (PP) Catalyst PP Process Technology Licensing PE / PP Single Site Catalyst Chemical Catalysts Zeolite Technology Biofuels Catalysts MTO Catalysts

Legend ★ Market Leader ☆ Strong Position ☑ Developing Position ☐ No Position Source: GRA 2014 Investor Day Presentation 7

2008 ★ ★ ★ ☑ ☑ ★ ★ ☑ ☐ ☑ ☑ ★ ☐ ☐

2014 ★ ★ ★ ☆ ☆ ★ ★ ★ ★ ☆ ☆ ★ ☑ ☑

IV. Business Model: Competitive Advantages Technical Barriers to Entry §  § 

Technical Advantages § 

Grace’s products are non-commodity with individual customer customization New catalyst products have research life cycles of at least 1 year

Technical advantages of Grace’s product results in economic uplift of $0.40/bbl(1) Competitive Base

C/O Ratio

6.9

6.4

76.0

77.4

1.0

1.0

LPG, wt%

18.3

18.6

Gasoline

54.2

55.3

LCO, wt%

17.2

16.9

6.8

5.7

Conversion, wt% Dry Gas, wt%

“Extensive research by my team is necessary to create superior technology that meets specific needs. Product customization is a requirement for us to succeed.” –Anonymous, Senior Principal Engineer, W.R. Grace

Bottoms, wt%

Economies of scale from R&D expenditures

1.  Christophe Chau, Rosann Schiller, W.R. Grace Catalagram Spring 2015

8

W.R. Grace

IV. Business Model: Recession Protection Recession protection § 

§ 

Above-cycle utilization

Through the 2008 recession, Grace experienced only a 15% revenue reduction while increasing operating margins due to pricing power Overall improvement in margins since 2010 highlights operating leverage, sustained ROIC, and nimble supply chains W.R. Grace Key Operating Metrics 3500

40.0%

3000

35.0%

$mm

25.0%

2000

20.0% 1500

15.0%

1000

10.0%

500

5.0%

0

0.0%

EBITDA Margin %

§ 

Above average utilization allows the business to benefit from increased operating leverage

§ 

Difficulty of supply coming online provides a favorable supply/demand backdrop (demand expected to grow 3.0% annually)

*A lb emarle  IR  P res entatio n **C hemical  W eek ***Letz s ch  C o ns ulting ****T he  C atalys t  G ro up

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Revenue

Industry has a current utilization of 94.6% while normalized cyclical utilization is 85.0%

Key Market Size ($mm)* FCC Cost ($/mt)** Sales Volume ('000s mt) Annual Capacity ('000s mt)*** Utilization Typical Utilization**** Deviation from Norm

30.0%

2500

§ 

Gross Margin % EBIT Margin %

9

Value $2,622.0 $3,300.0 794.5 839.5 94.6% 85.0% 11.3%

V. Value Drivers: Construction Products Spin-off 1. Spin-off of construction products provides multiple pathways to value realization. 1.  Multiples normalization to industry peers results in 33.2% upside §  §  §  § 

Specialty Catalysts comps trade at EV/FY14 EBITDA of 8.7-14.0x Construction Products comps trade at EV/EBITDA of 6.7-9.3x Grace trades at EV/EBITDA of 11.2x due to disproportionate drag from construction On a SOTP+NOL basis, Grace should be trading at a multiple of 13.0x, an upside of 33.2%

2.  Leverage moved to Construction Products spin-off, delevering New Grace cap structure §  New Grace is anticipated to have Net Debt/Adj. EBITDA of 2.0-2.5x, while Grace Construction Products is projected to have Net Debt/Adj. EBITDA of 3.0-3.5x

3.  Refocused business models §  Spin-off will allow for investment decisions to be optimized based on each respective company, improving management focus and cost productivity §  Grace Construction Products requires significantly more capex relative to New Grace, requiring a different financing model

10

V. Value Drivers: Effective Capital Allocation 2. W.R. Grace is properly incentivized to continue implementing effective capital allocation. Distressed Activist Ownership

Incentivized Management

§  Activist investors own 27.7% shares

§  Fred Festa, CEO and Chairman of W.R. Grace, has a $14.9mm position in Grace common stock §  Festa’s background at GE and Morgenthaler Private Equity Partners shapes his ideology of shareholder value enhancement §  According to the DEF14A, key executives must maintain 3-5x base salary in the form of stock

§  Engaged shareholder base improves capital allocation and creates value enhancement

Business Reinvestment

Share Repurchases §  In Feb. 2014, the board announced a share repurchase program of $500mm ending Jan. 2015 §  In Feb. 2015, the board announced a similar program to buy back an additional $500.0mm §  Grace’s $557.5mm cash position provides dry powder to execute share repurchases §  $400mm adjusted annual FCF provides additional funds to for shareholder friendly practices 1.  CapitalIQ Public Ownership Detail - Form13F 2.  Definitive proxy statement – DEF 14A 3.  WR Grace: The End of an Empire- The Wall Street Journal

§  W.R. Grace only operates in core competency businesses where they have a #1 or #2 position. §  Grace has demonstrated accretive bolt-on acquisitions through 22 successful investments from 2003 through 2014 §  Disciplined Investment Criteria: Strategic fit (technology, market access), hard cost and capital synergies, and risk-adjusted return. 11

V. Value Drivers: Net Operating Loss Carryforwards - Tax Asset 3. W.R. Grace’s overlooked NOLs provide additional upside to SOTP valuation. §  §  §  § 

W.R. Grace has accumulated a $1.8 billion NOLs ($670mm - Carryforward from emergence of bankruptcy, $632mm - PI DPO settlement, $490mm - Warrant settlement) Lack of significant change in ownership during the bankruptcy process allowed W.R. Grace to maintain a substantial amount of its NOLs (governed by IRC Section 382 Limitation) The cash tax rate is anticipated to remain in the range of 10-15% through 2018 NOLs have a NPV of $0.4 billion adding an additional 5.7% upside to SOTP valuation 2 0 15 E

2 0 16 E

2 0 17 E

2 0 18 E

2 0 19 E

2020E

2 0 2 1E

Revenue EBIT US EBIT Interest Payments US EBI (Pre-Tax Income)

N O L   D C F

3375.1 667.0 200.1 -59.3 140.8

3511.3 710.0 213.0 -59.3 153.7

3651.0 754.9 226.5 -59.3 167.2

3793.4 801.5 240.5 -59.3 181.1

3937.7 838.2 251.4 -59.3 192.1

4083.3 874.9 262.5 -59.3 203.1

4229.3 911.3 273.4 -59.3 214.1

Beginning US NOL Balance NOL Carryforw ard Usage Ending US NOL Balance

1800.0 -140.8 1659.2

1659.2 -153.7 1505.5

1505.5 -167.2 1338.3

1338.3 -181.1 1157.2

1157.2 -192.1 965.0

965.0 -203.1 761.9

761.9 -214.1 547.8

35%

35%

35%

35%

35%

35%

35%

Beginning DTA Balance DTA Change Ending DTA

630.0 -49.3 580.7

580.7 -53.8 526.9

526.9 -58.5 468.4

468.4 -63.4 405.0

405.0 -67.2 337.8

337.8 -71.1 266.7

266.7 -74.9 191.7

Discount Factor Discounted Value

0.922 45.4

0.850 45.7

0.784 45.9

0.723 45.8

0.666 44.8

0.614 43.7

0.566 42.4

Statutory Tax Rate

Discount Rate NPV of NOLs ($mn)

8.46% 408.1

WACC

12

V. Value Drivers: Margin Expansion Opportunities 4. W.R. Grace has a visible pathway and credible track-record for margin expansion. § 

Spin-off of GCP provides restructuring opportunities to reduce operating costs ›  › 

Improved management focus and lower corporate costs drive operating margin expansion Based on 2015 Q1 results, adjusted EBIT Margin has already increased 130 bps yoy

Further Margin Expansion Opportunities: 1.  Continued investment in targeted R&D creates better product mix with improved pricing power due to innovative product launches in an up-cycle (+100 bps) › 

Pricing power will be further driven by secular demand growth, especially for FCC Catalysts

2.  Aggressive supply chain repositioning based on flexible global operations enables margin expansion at the operating income level (+100 bps) › 

Grace has benefited from increase in demand in key global markets

3.  Cycle-bottom prices for major inputs such as rare earth metals, especially Lanthanum Oxide, reduce production costs (+100 bps) › 

At $1.03/kg (2014), Lanthanum Oxide is at the lowest price point since 2008 "Improving petchem ROA should come from underlying operational improvement and better capital allocation."

–Dan Loeb, Third Point, 2014 Q1 Investor Letter 13

VI. Mispricing and Catalysts Mispricing § 

Extended 13 year Chapter 11 process due to asbestos litigation has resulted in limited coverage for Company besides investment positions by distressed funds

› 

§ 

Sell side overlooks excess assets including excess cash ($500.0mm) and excess investment in unconsolidated affiliate ($173.8mm) Provides additional 8.4% upside

› 

§ 

› 

Management’s ability to improve the margin post-restructuring is not modeled into sellside valuation Margin expansion by 300 basis points provides 16.7% incremental returns

Share repurchases driven by incentivized management and distressed activist funds Monetization of JV with Chevron provides reclassification of excess asset into core operations

Increased Investor Transparency › 

› 

14

Separation of GCP will provide natural shareholder turnover, lead to normalized multiples expansion, and address “double cyclicality” valuation challenges

Shareholder Friendly Measures › 

Margin improvement is underestimated › 

Spin-off of Grace Construction Products › 

Excess Asset Value › 

§ 

§ 

Post-Reorganization Equity › 

§ 

Catalysts

Increased coverage of orphan stock after extended Chapter 11 process will increase investor demand Simplified capital structure due to PI DPO reduces situational complexity

VII. Valuation W.R. Grace has multiple pathways to unlock value for an asymmetric risk-reward. Incremental Return

Cumulative CAGR

I.  Sum of the Parts

16.1%

5.1%

II. Net Operating Loss Carryforwards

+ 5.7%

6.8%

III. Share Repurchase

+ 1.6%

7.3%

IV. Margin Expansion

+ 16.7%

11.9%

40.1%

11.9%

15

VIII. Key Risks Key Risks & Mitigants 1.  Spin-off of construction materials business may not receive approval. §  Panelist of distressed and activist funds will help push through a vote §  Management under Fred Festa will focus on value accretive shareholder measures

2.  Cyclicality of construction end markets could result in depressed sales. §  Spin-off will help separate out cyclical construction from non-cyclical specialty catalysts/materials §  Improving non-housing construction provides favorable backdrop for construction business

3.  W.R. Grace’s Defined Benefit Plan is underfunded by $473.1 million. §  Margin of safety even with additional funding contribution provides asymmetric risk-reward §  Shift to Defined Contribution Plan will provide more feasible course of action

4.  Asbestos lawsuit result in excess payments to Property Damage claimholders. §  Management incentive is to provide accurate, if not aggressive, estimates of asbestos liability to avoid loss recognition in later years §  Hard cap of $80mm on amount of additional liability that can be payable to claimholders

16

IX. Thank You! Primary Research Current Employees Anonymous – Senior Principal Engineer Rosanne Schiller – Director of Marketing David Joseph – Investor Relations Tania Almond – Investor Relations

Special Thanks To: Justin Ang Sahil Khetpal Dominic Waltz

Competitors Matthew Juneau – Albemarle Investor Relations Consultants Anonymous – The Catalyst Group

Important Disclosures: Certain accounts managed by us are currently long W.R. Grace. We may buy and/or sell shares of W.R. Grace in the future for the accounts managed by us without notice, and we are under no obligation or agreement to take, or not take, any action or restrict our actions in any manner. This is not a recommendation to buy or sell shares. Our views are subject to change without notice and we may trade in any manner, whether consistent or inconsistent with this recommendation. The information provided is from public sources. We have not independently verified this information and we make no representations as to the accuracy or correctness of any such information. We undertake no obligation to update any information below.

Sell-Side Anonymous – Goldman Sachs Anonymous – Credit Suisse

17

X. Appendix: Bankruptcy Overview Chapter 11 Reorganization § 

W.R. Grace filed for voluntary Chapter 11 on April 2, 2001 as a result of asbestos litigation

§ 

On February 3, 2014, W.R. Grace emerged from bankruptcy

§ 

Effects: 1.  Two asbestos trusts under Section 524(g) of Bankruptcy Code 1.  PI (Personal Injury) Trust-no further obligations 2.  PD (Property Damage) Trust broken into non-ZAI and ZAI (attic insulation product) claims

2.  Company has accrued unresolved non-ZAI PD claims that are probable and estimable 1.  Non-fixed claims 2.  Obligated payments to PD trust every 6 months based on non-ZAI PD Claims allowed by bankruptcy court during preceding 6 months + interest + PD Trust expenses

3.  ZAI PD Claims obligated for fixed payment of $30mm February 3, 2017 and 10 contingent payments of $8mm per year to ZAI PD Account during 20 year period beginning on February 3, 2019, with payments due only if assets of ZAI PD account fall below $10mm during preceding year 1.  Liability recorded for fixed deferred payment 2.  Not recorded for contingent payments 3.  Secured by 77.4mm shares of new issuance common stock 18

X. Appendix: Summary of Variant View Market Perspective

Our Perspective

§ 

Extended Chapter 11 process has resulted in extended financial and reputational damage to Company

§ 

Reorganized Company has minimal exposure to asbestos litigation and long term contract redemption rates are steady

§ 

Alternative fuel sources provide tail risk for WR Grace’s operations

§ 

Secular tailwinds from renewed focus on heavy oil refinement will drive volume sales due to inelastic demand

§ 

Bearish outlook on energy-related industries

§ 

W. R. Grace benefits from lower crude prices due to increased catalyst demand by refineries

§ 

Market is focused on short term EPS vs. earnings quality

§ 

§ 

Sell-side operates in sector specific pigeonholes of chemicals vs construction

Due to FIFO Inventory accounting, there is a lag until low input costs are realized in COGS, which increase gross margin

§ 

SOTP valuation provides valuation clarity

19

X. Appendix: Specialty Building Materials & Packaging Industry Demand Driven Building Products § 

§ 

High Value Packaging Products § 

Commercial construction recovery in US and emerging markets infrastructure buildout creating demand for specialty building materials Increasing quality and sustainability of construction projects relies on advanced products ›  › 

§  §  § 

Waterproofing Systems Roofing products

Conformation to Food & Beverage industry regulations Focus on design for convenience and sustainability Solutions address shift away from BPA epoxy resins towards “green products” Products are integrated into customer plants and supply chains Consumer Packaging Sealants Market Size 3,000

% CAGR: 4.1

$millions

2,500 2,000 1,500 1,000 500 0 2012 1.  BCC Research

20

2013

2014

2019

X. Appendix: Specialty Construction Products Industry Highly Localized § 

Cement Additives Marketshares

18% 71%

§  § 

Concrete Admixtures Market Share

15%

6%

8%

5%

7% 70%

Sika

BASF

Othes

BASF

Grace

Sika

Others

Global Cement Trends 6,000,000,000

120.00

5,000,000,000

100.00

4,000,000,000

80.00

3,000,000,000

60.00

2,000,000,000

40.00

1,000,000,000

20.00

0

0.00 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Grace

§ 

Production

21

Unit value ($/t)

2020 2030

§ 

Specialty cement products are critical for cement manufacturers to enhance quality Expansion in cement capacity from NA construction revival, emerging market growth Matching Supply/Demand characteristics imply stable, growing prices Grace’s advanced products cater to efficiency, environmental concerns

Price

Primary products are Cement Additives and Concrete Admixtures Fragmented industry with few dominant players ›  Grace has manufacturing facilities across the world, creating high quality global brand

Cement Pouction (metic tons)

§ 

Ongoing Secular Global Growth

X. Appendix: Valuation Sum of the Parts Base Case

Segment New Grace New GCP

Base Case + Share Repurchases

2015E EBITDA $ $

Low

652.3 177.3

Multiple High

10.0x 8.0x

Core Enterprise Value Plus: Excess Cash Plus: Excess Investments Plus: Value from NOLs Adjusted Enterprise Value Less: Debt Total Equity Value

9.6x

EV Low

High

12.0x $ 6,523.1 $ 10.0x $ 1,418.1 $ 11.6x

7,941.2 500.0 173.8 408.2 $ 9,023.3 2,015.8 $ 7,007.5

Fully Diluted Shares Outstanding (MM) Less: Share Repurchase Program Total Shares Outstanding

$ $

7,827.7 1,772.7

$

New Grace New GCP

9,600.4 500.0 173.8 408.2 10,682.4 2,015.8 8,666.6

72.6 0.0 72.6

SOTP Equity Value Cumulative Upside Value CAGR over 3 Years

Segment

New Grace New GCP

2015E EBITDA $ $

Core Enterprise Value Plus: Excess Cash Plus: Excess Investments Plus: Value from NOLs Adjusted Enterprise Value Less: Debt Total Equity Value Fully Diluted Shares Outstanding (MM) Less: Share Repurchase Program Total Shares Outstanding SOTP Equity Value Cumulative Upside Value CAGR over 3 Years

716.4 210.4

Low

Multiple High

119.38 21.79% 6.79%

SOTP Equity Value Cumulative Upside Value CAGR over 3 Years

10.0x 8.0x 9.5x

EV Low

High

12.0x $ 7,164.3 $ 10.0x $ 1,683.5 $ 11.5x

8,847.8 173.8 408.2 $ 9,429.8 2,015.8 $ 7,414.0

$ $

72.6 5.1 67.5 $ 109.84 $ 12.06% 3.87%

652.3 177.3

Low

Multiple High

10.0x 8.0x 9.6x

EV Low

8,597.2 2,104.3 10,701.5 173.8 408.2 11,283.6 2,015.8 9,267.8 72.6 5.1 67.5 137.30 40.08% 11.89%

22

High

12.0x $ 6,523.1 $ 10.0x $ 1,418.1 $ 11.6x

7,941.2 173.8 408.2 $ 8,523.3 2,015.8 $ 6,507.5

Fully Diluted Shares Outstanding (MM) Less: Share Repurchase Program Total Shares Outstanding

Base Case + Share Repurchases + Margin Expansion

Segment

$ $

Core Enterprise Value Plus: Excess Cash Plus: Excess Investments Plus: Value from NOLs Adjusted Enterprise Value Less: Debt Total Equity Value

72.6 0.0 72.6

96.52 $ -1.53% -0.51%

2015E EBITDA

$ $

72.6 5.1 67.5 $

96.41 $ -1.64% -0.55%

7,827.7 1,772.7 9,600.4 173.8 408.2 10,182.4 2,015.8 8,166.6 72.6 5.1 67.5 120.99 23.43% 7.27%

X. Appendix: Valuation Multiples Valuation – Comps Company

Enterprise

Name

Value

Revenue (USD) 2013A

2014A

2015E

New Grace Comps

Albemarle  Corporation  (NYSE:ALB) Johnson  Matthey  plc  (LSE:JMAT) Clariant  AG  (SWX:CLN)

EBITDA (USD) 2013A

2014A

EV/EBITDA 2015E

2013A

2014A

2015E

0

                                                           6,505.5                2,519.2                2,394.3                2,445.5                        705.4                        428.7                        899.7                                                      11,512.2            16,071.3            16,710.0            15,661.9                        781.0                        860.7                        863.0                                                            8,112.6                6,390.2                6,432.3                6,261.8                        820.3                        833.0                        894.4

9.22x 14.74x 9.89x

15.17x 13.38x 9.74x

7.23x 13.34x 9.07x

                                                           2,021.6                1,199.7                1,226.8                1,192.6                        172.1                        183.9                        186.5                                                            9,419.4                5,408.1                5,859.4                5,833.3                        697.8                        823.3                        901.3

11.75x 13.50x

10.99x 11.44x

10.84x 10.45x

New GCP Comps

Forbo  Holding  AG  (SWX:FORN) Sika  AG  (SWX:SIK)

23

X. Appendix: Valuation Operating Model – Base Case 2 0 10 A

Revenue Refining Catalysts Growth Rate % Polyolefin and Chemical Catalysts Growth Rate % Catalysts Technologies Growth Rate % Materials Technologies Growth Rate % Revenue Construction Revenue Growth Rate % Total Revenue

2 0 12 A

2 0 13 A

2 0 14 A

2 0 15 E

2 0 16 E

2 0 17 E

2 0 18 E

2 0 19 E

2020E

2 0 2 1E

2675.0

1077.5 45.2% 269.8 12.3% 1347.3 37.2% 872.6 6.5% 2219.9 992.0 13.6% 3211.9

986.8 -8.4% 281.3 4.3% 1268.1 1.0% 862.6 1.0% 2130.7 1024.8 3.3% 3155.5

832.4 -15.6% 291.6 3.7% 1124.0 -11.4% 878.5 1.8% 2002.5 1058.2 3.3% 3060.7

845.5 1.6% 401.3 37.6% 1246.8 10.9% 890.6 1.4% 2137.4 1105.6 4.5% 3243.0

873.6 3.3% 445.4 11.0% 1319.0 6.1% 914.9 2.7% 2233.9 1138.8 3.0% 3372.6

903.5 3.4% 489.2 9.8% 1392.8 5.6% 939.8 2.7% 2332.6 1172.9 3.0% 3505.5

935.6 3.5% 531.6 8.7% 1467.2 5.3% 965.4 2.7% 2432.6 1208.1 3.0% 3640.7

969.8 3.7% 571.5 7.5% 1541.3 5.1% 991.7 2.7% 2533.0 1244.4 3.0% 3777.4

1006.4 3.8% 607.7 6.3% 1614.1 4.7% 1018.7 2.7% 2632.9 1281.7 3.0% 3914.5

1045.5 3.9% 639.1 5.2% 1684.6 4.4% 1046.5 2.7% 2731.1 1320.1 3.0% 4051.3

1087.3 4.0% 664.7 4.0% 1752.0 4.0% 1075.0 2.7% 2827.0 1359.7 3.0% 4186.8

288.3 29.3% 191.8 23.4% -108.1 -6.0% 372.0

441.3 32.8% 189.6 21.7% -89.1 -4.0% 541.8

447.8 35.3% 191.5 22.2% -81.2 -3.8% 558.1

381.7 34.0% 213.2 24.3% -68.4 -3.4% 526.5

444.6 35.7% 217.3 24.4% -60.6 -2.8% 601.3 18%

483.5 36.7% 224.7 24.6% -63.4 -2.8% 644.8 199.3 844.1 25.0% 23.7% 1.3%

524.5 37.7% 232.3 24.7% -66.2 -2.8% 690.6 205.3 895.9 25.6% 24.6% 1.0%

567.2 38.7% 240.1 24.9% -69.0 -2.8% 738.3 211.4 949.7 26.1% 25.3% 0.8%

595.9 38.7% 248.2 25.0% -71.9 -2.8% 772.2 217.8 990.0 26.2%

624.0 38.7% 256.6 25.2% -74.7 -2.8% 805.9 224.3 1030.2 26.3%

651.3 38.7% 265.2 25.3% -77.5 -2.8% 839.0 231.0 1070.0 26.4%

677.3 38.7% 274.1 25.5% -80.2 -2.8% 871.2 238.0 1109.2 26.5%

239.6 24.4% 160.0 19.5% -109.9 -6.1% 89.9

388.8 28.9% 158.7 18.2% -90.9 -4.1% 97.3 3.0% -131.5

393.8 31.1% 162.0 18.8% -82.9 -3.9% 125.2 4.0% -122.8

327.5 29.1% 181.8 20.7% -72.1 -3.6% 151.7 5.0% -110.2

378.3 30.3% 185.2 20.8% -65.2 -3.1% 161.7 5.0% -99.0

409.4 31.0% 191.8 21.0% -68.2 -3.1% 168.2 5% -103.0 -3.1% 666.5 199.9 533.1

442.1 31.7% 198.7 21.1% -71.2 -3.1% 174.9 5% -107.0 -3.1% 708.6 212.6 569.6

476.0 32.4% 205.7 21.3% -74.3 -3.1% 181.7 5% -111.1 -3.1% 752.3 225.7 607.5

510.8 33.1% 213.1 21.5% -77.3 -3.1% 188.6 5% -115.3 -3.1% 797.2 239.2 646.6

534.9 33.1% 220.6 21.7% -80.4 -3.1% 195.5 5% -119.5 -3.1% 831.6 249.5 675.2

558.3 33.1% 228.4 21.8% -83.4 -3.1% 202.5 5% -123.7 -3.1% 865.5 259.7 703.4

580.6 33.1% 236.5 22.0% -86.3 -3.1% 209.3 5% -127.8 -3.1% 898.7 269.6 730.8

742.0 240.3 982.3 819.4 1801.7 873.3

EBITDA Catalysts Technologies Margin % Materials Technologies Margin % Corporate Margin % New Grace EBITDA Construction EBITDA Total EBITDA Margin % Consensus Margin % Difference EBIT Catalysts Technologies Margin % Materials Technologies Margin % Corporate (New Grace) Margin % Construction Products Margin % Corporate (Full) Margin Total EBIT US EBIT EBIT on New Grace

2 0 11A

-163.1

626.2 30.0% 289.7

1.  Tax Savings = Change in NOL Balance * Regular Federal Tax Rate

456.6

472.9

437.2

24

498.3

X. Appendix: Valuation Operating Model – NOLs N O L   D C F

2 0 10 A

2 0 11A

2 0 12 A

2 0 13 A

2 0 14 A

2 0 15 E

2 0 16 E

2 0 17 E

2 0 18 E

2 0 19 E

2020E

2 0 2 1E

2675.0

3211.9

3155.5

3060.7

3243.0

3375.1 667.0 200.1 -59.3 140.8

3511.3 710.0 213.0 -59.3 153.7

3651.0 754.9 226.5 -59.3 167.2

3793.4 801.5 240.5 -59.3 181.1

3937.7 838.2 251.4 -59.3 192.1

4083.3 874.9 262.5 -59.3 203.1

4229.3 911.3 273.4 -59.3 214.1

1800.0 -140.8 1659.2

1659.2 -153.7 1505.5

1505.5 -167.2 1338.3

1338.3 -181.1 1157.2

1157.2 -192.1 965.0

965.0 -203.1 761.9

761.9 -214.1 547.8

35%

35%

35%

35%

35%

35%

35%

Beginning DTA Balance DTA Change Ending DTA

630.0 -49.3 580.7

580.7 -53.8 526.9

526.9 -58.5 468.4

468.4 -63.4 405.0

405.0 -67.2 337.8

337.8 -71.1 266.7

266.7 -74.9 191.7

Discount Factor Discounted Value

0.922 45.4

0.850 45.7

0.784 45.9

0.723 45.8

0.666 44.8

0.614 43.7

0.566 Remaining Value 42.4 94.4

Revenue EBIT US EBIT Interest Payments US EBI (Pre-Tax Income) Beginning US NOL Balance NOL Carryforw ard Usage Ending US NOL Balance Statutory Tax Rate

Discount Rate NPV of NOLs ($mn)

8.46% 408.1

WACC

Note: Assum ption Justifications Discount Rate

We use WACC as w e believe it reflects the riskiness of generating shieldable income

US EBIT

We assume that US operations represent 30% of Total EBIT going forw ard, in line w ith recent historicals

Interest Payments

We assume Debt Load as specified by Management Guidance and assume no debt paydow n over forecast period

1.  Tax Savings = Change in NOL Balance * Regular Federal Tax Rate

25

X. Appendix: Valuation DCF – Base Case Taxes Savings Marginal Tax Rate

49.2 35%

DC F

EBIT on New Grace Tax Rate EBI After Tax Catalysts Technologies Materials Technologies Corporate (+) D&A NWC % of Revenues (-) Δ NWC (-) Capex Cash Flow Before Tax Refund Tax Refund Free Cash Flow Discount Factor Discounted Value New Grace EV New GCP EV Excess Investments Debt Total Equity Value Shares Outstanding Value Per Share

2 0 10 A

$

2 0 11A

2 0 12 A

2 0 13 A

2 0 14 A

289.7

456.6

472.9

437.2

498.3

48.7 31.8 2.6 83.1 289.3 11% (49.70)

52.5 30.9 2.6 86 387.8 12% (98.50)

54 29.5 2.6 86.1 353.6 11% 34.20

54.2 31.4 5.7 91.3 240.7 8% 112.90

66.3 32.1 7 105.4 379.2 12% (138.50)

2 0 15 E

9188.7 1893.9 *Based on m ultiples 673.8 *Unconsolidated affiliate and excess cash 2015.8 9740.7 67.5 144.31

53.6 35% 2 0 16 E

58.2 35% 2 0 17 E

62.9 35%

66.6 35%

2 0 18 E

2 0 19 E

70.1 35% 2020E

533.1 35% 346.5

569.6 35% 370.2

607.5 35% 394.9

646.6 35% 420.3

675.2 35% 438.9

703.4 35% 457.2

111.8 394.4 12% (15.16) -83.8 359.3 49.2 408.5 0.922 376.6

121.0 409.9 12% (15.54) -90.8 384.9 53.6 438.6 0.850 372.8

130.8 425.7 12% (15.81) -98.1 411.8 58.2 470.0 0.784 368.3

125.7 441.7 12% (15.98) -94.2 435.7 62.9 498.6 0.723 360.3

130.7 457.7 12% (16.04) -98.0 455.5 66.6 522.1 0.666 347.8

135.6 473.7 12% (15.99) -101.7 475.1 70.1 545.2 0.614 334.9

73.6 35% 2 0 2 1E

0.0 35%

0.0 35%

CV

730.8 35% 475.1

140.4 489.6 12% (15.84) -105.3 494.3 '21 73.6 Term inal Value 567.9 11843.1 0.566 0.566 321.6 6706.4

Grow th 3.50%

Key DCF Metrics Equity Beta

1.066

Beta After Mean Reversion

1.044

Yield on 10% Treasury Note

0.023

Equity Cost of Capital

9.6%

Debt Cost of Capital

4.05%

Market Cap

7218.8

Total Enterprise Value

8683.2

Net Debt

1464.4

WACC

8.46%

L+350

Note: Assum ption Justifications Refining growth

"Petroleum refining market expected to grow at 2.7% according to HIS Chemical". We estimate Grace's competetive advantages to enable stronger market share capture

Polyolefin/Chemical Catalysts growth

"Propylene Market grow ing at ~11% CAGR and longer term at 5% according to Nexant Technologies Prospectus"

Materials growth

"Grace CEO on Q4 call: seeing strong signals in Materials tech". Our conservative estimates used here at ~ developed economies GDP Grow th

Operating Margins

Based on strong pricing environment and low input costs w e are estimating persistance in margins going forw ard for the value-added new Grace segments

1.  Tax Savings = Change in NOL Balance * Regular Federal Tax Rate

26

X. Appendix: Valuation DCF – Downside Case DC F

2 0 10 A

2 0 11A

2 0 12 A

2 0 13 A

2 0 14 A

2 0 15 E

2 0 16 E

2 0 17 E

2 0 18 E

Total Revenue growth %

2675.0

3211.9 20.1%

3155.5 -1.8%

3060.7 -3.0%

3243.0 6.0%

2762.0 -14.8%

2615.3 -5.3%

2759.2 5.5%

3200.6 16.0%

EBITDA margin %

372.0 13.9%

541.8 16.9%

558.1 17.7%

526.5 17.2%

601.3 18.5%

275.3 10.0%

375.5 14.4%

401.9 14.6%

511.2 16.0%

EBIT on New Grace margin %

289.7 10.8%

456.6 14.2%

472.9 15.0%

437.2 14.3%

498.3 15.4%

185.6 6.7%

285.8 10.9%

312.2 11.3%

421.4 13.2%

EBIT on New Grace Tax Rate EBI After Tax (+) D&A % of Rev (-) Δ NWC (-) Capex Free Cash Flow Discount Factor Discounted Value New Grace EV New GCP EV Excess Investments Debt Total Equity Value Shares Outstanding Value Per Share

289.7

456.6

472.9

437.2

498.3

83.1 3.1% -49.7

86 2.7% -98.5

86.1 2.7% 34.2

91.3 3.0% 112.9

105.4 3.3% -138.5

185.6 15.0% 157.7 89.8 3.3% 56.25 -89.8 214.0 0.922 197.3

285.8 15.0% 242.9 89.8 3.4% 17.15 -89.8 260.1 0.850 221.1

312.2 15.0% 265.3 89.8 3.3% (16.82) -89.8 248.5 0.784 194.8

$

6062.9 1820.3 *Based on m ultiples 673.8 2015.8 4720.9 67.4 70.07

CV

421.4 15.0% *NOL Projection 358.2 89.8 2.8% (13.10) '18 -89.8 Term inal Value 345.1 7197.2 0.723 0.723 249.4 5200.4

Grow th 3.50%

Key DCF Metrics

Note: Assum ption Justifications Revenue Growth Recession metrics from 2009 and 2010 Applied to FY15 and FY16 EBIT Margins

Recession + Post Recession margins applied to projection period

Tax Rate

Estimates tax rate using NOL Carryforw ards to shield income. Based on Management guidance

Perpetuity Grow th

Reasonable perpetuity grow th of global GDP

27

Equity Beta

1.066

Beta After Mean Reversion

1.044

Yield on 10% Treasury Note

0.023

Equity Cost of Capital

9.6%

Debt Cost of Capital

4.05%

Market Cap

7218.8

Total Enterprise Value

8683.2

Net Debt

1464.4

WACC

8.46%

L+350

X. Appendix: Valuation DCF Sensitivities Base Case Sensitivity

Bear Case Sensitivity

WACC 9.5% 9.0% 8.5% 8.0% 7.5%

2.5% $108.9 $116.8 $126.1 $137.1 $150.2

Terminal Grow th Rate 3.0% 3.5% $114.3 $120.5 $123.3 $130.9 $133.9 $143.3 $146.7 $158.5 $162.3 $177.5

WACC 9.5% 9.0% 8.5% 8.0% 7.5%

2.5% 11.1% 19.2% 28.6% 39.8% 53.3%

Terminal Grow th Rate 3.0% 3.5% 16.6% 22.9% 25.8% 33.5% 36.6% 46.2% 49.7% 61.7% 65.6% 81.1%

4.0% $127.9 $140.0 $154.8 $173.2 $196.9

4.5% $136.8 $151.1 $169.1 $192.1 $222.9

WACC 9.5% 9.0% 8.5% 8.0% 7.5%

2.5% $45.3 $50.5 $56.6 $63.9 $72.6

Terminal Grow th Rate 3.0% 3.5% 4.0% $49.3 $53.9 $59.5 $55.3 $60.9 $67.6 $62.4 $69.3 $77.7 $70.9 $79.5 $90.2 $81.3 $92.3 $106.3

4.5% $66.1 $75.9 $88.2 $104.0 $125.1

4.0% 30.5% 42.8% 57.9% 76.7% 100.9%

4.5% 39.5% 54.2% 72.5% 96.0% 127.4%

WACC 9.5% 9.0% 8.5% 8.0% 7.5%

2.5% (52.7%) (47.3%) (40.9%) (33.3%) (24.2%)

Terminal Grow th Rate 3.0% 3.5% 4.0% (48.5%) (43.7%) (37.9%) (42.3%) (36.4%) (29.4%) (34.9%) (27.7%) (18.9%) (26.0%) (17.0%) (5.8%) (15.1%) (3.7%) 11.0%

4.5% (31.0%) (20.7%) (7.9%) 8.6% 30.6%

28