Document xm6z2bwqVZoKMaqV2gm77yxG
FILE NAME: WR Grace (WRG)
DATE: March 1963
DOC#: WRG325
DOCUMENT DESCRIPTION: 1963 Draft letter to Federal Trade Commission regarding WR Grace acquisition of Dawbarn Brothers and assets of Zonolite Company.
-- ri. ,,
ngton 25,
Ter.porary File No. 7-7307 7-7681
Ger.tle.Tien: This will acknowledge receipt of your letter of
March IS, 19^3, in which you request information relating to the acquisition by W. R. Grace & Co. (''Grace'1) of Dawbarn Brothers, Incorporated, ar.d the proposed acquisition by Grace of the assets of Zonolite Company ("Zonolite'').
On January 17, 1963, Grace and Zonolite entered ' Into an agreement providing for the acquisition by Grace of all of the assets of Zonolite lr. consideration of the Issuance by Grace tc Zonolite of shares of Grace's common stock and the assumption by Grace of the llaoiiltles of Zonolite. The closing under this agreement Is scheduled . to take place on April 10, 19 6 3 .
This transaction has been under negotiation since the early fall of 1962 and was first announced publicly by Grace and Zonolite in October 1962. In view of the short time remaining prior to the closing under the agreement between Grace and Zonolite it 13 desired to furnish to you
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D2 0025034 15166216
as promptly as possible the Information you have requested
regarding the Zonollte acquisition to the extent the same
Is In the possession of Grace. The additional information
which you have requested regarding Grace and the acquisition
of Dawbarn Brothers, Incorporated will be submitted to you
in due course.
DESCRIPTION o p o r a c e a n d z o n o l i t e
W. R. Grace & C o .
'
Grace Is engaged In the manufacture and sale of chemicals, in transportation, In petroleum, In banking and
in agriculture. A brief description of the principal opera
tions of Grace (excluding the operations of the Grace National
Bank of New York, Orace Line, Inc. and all foreign operations,
except those conducted by the Overseas Chemical Division) is as follows:
Cryovac Division - Cryovac manufactures a diversi
fied line of flexible packaging materials consisting of bags, pouches, and shrinkable transparent film wrap.
Devision Chemical Division - Davison produces
agricultural chemicals, principally mixed fertilizers, super
phosphates and concentrated phosphates for agricultural uses.
In the Industrial chemical field, the division manufactures cracking catalysts, Industrial catalysts, sllloa gel, sulphuric
acid, and silicofluor^dea. Davison also produces reactor materials which are sold principally for nuclear energy uses Including power reactors.
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Dewey and Almy Chemical Division - Dewey and Almy
produces compounded chemical specialties sold primarily to
:
customers who are engaged in or supply the automotive parts,
construction and construction materials, shoe, container
and closure, textile and luggage and related Industries.
This Division also produces organic chemicals consisting of
copolymer latlces, dispersing agents, polyvinyl acatate homo
polymer and copolymer emulsions, plasticizers, paper coating
latex and latex compounds. Other Items Include meteorological
balloons and soda lime gas absorbents.
Hatco Chemical Division - Hatco produces plasticizers,
and esters used in the manufacture of synthetic rubber, vinyl
products, coatings and Jet lubricant*, and sebaole acid.
Nitrogen Products Division - NPD manufactures anhydrous
ammonia and urea which are sold for use aa fertilizer and animal
feed and for certain industrial uses.
Oversets Chemical Division - This Division directs
the activities of certain subsidiaries of Oraoe in sixteen
foreign countries and manufactures and sells a diversified
line of chemical specialties, primarily the same as those sold
by Tewey and Almy and Cryovac.
Polymer Chemicals Division - PCD manufactures and
sella high density polyethylene. In addition it sells poly
styrene manufactured by Cosden Petroleum Corporation and poly
propylene and low density polyethylene manufactured by others.
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Cosden Petroleum Corporation - Cosdon, which is
approximately 53% owned by Grace,produces and refines crude
oil and manufactures petrochemicals at two refineries lo
cated In Texas. It is anticipated that Grace's Interest In
Cosden will be terminated within the next few weeks as a f
result of announced plans for the liquidation of Cosden.
U. 3. Export/Import - Grace's export and Import
activities consist primarily In trading with Grace's South
American subsidiaries.
.
The following Is a schedule of the approximate *
sales in 1962 of the Grace Divisions referred to above:
1962 Hot Sales
(000)
Cryovac Division
. 3i,13S
Davison Chemical Division Dewey and Almy Chemical Division
, n l ' 735 51,291
Hateo Chemical Division
1.83*
Nitrogen Products Division
19,315
Overseas Chemical Division
-
39,051
Polymer Chemicaladvisioc
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*
Cosden Petroleum Corporation
V.
18,146
85,601
U. S. Sxport/Deport
.ir.
*3$koi6
. n
Zonollta Ooaparar
Zonollta 1a M id primarily la tte taalMM of ninir
and axpandlng wamiottlita Vamieulita la a ninaral whioh In ooaoa vita otter naturally ooourrlag tteloo and loan, will, whan teatad, tipand to a woluaa aany tlaaa lta original alM. To data, raraloullta tea baan aaad prlnaiptHy aa an insulating notarial, aa a lightwaight acgrafato for oansrata and plaatar, aa a lifhtwalgbt oarrlar for agrlaaltnral. tteaicala and aa a aoll ooadltloaar.
Zonollto aaxtota waxudoulita both In tte fox* of
and to alaoallanaoua industrial waara. in addition tha axpandad waraloullta la aold by Zonollta to a laxga nunbar of jobbtra and daalara who aarfcat tte notorial throughout tha Ghltad statoa and Canada for tte purpoaaa atated abort. About
100 of Zonollta'a total prqdaotlon of wandanlita ora la axportad
to Canada and otter foraign aoontriaa.
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1. The oorraot oorporet# title, Mlllnj address
and the tat tad data of Incorporation of Oraoa and Zonollt#
aro aa followsi Corporate Tltlo
Wallins Addraoo
State and Data of Incorporation
V. ft. Oreoa ft Oo.
Comaotlcot l w York 5, Wow lev* . '-Jhna 20, 1899
Zonollt#
139 South LaSalle Street Montana
CMoago 3, miaolo
Dm m s b t i, 1922
2. (a) Oopiea of tbs annual report of Ovmoo for
tho calendar years 1961 and 1962 and of tha annual reports
of Zonollt for tha flaoal roars ndad Waroh 31 1961 and
March 31, 1962 ars enclosed hsrswlth la tha foldar sarkad
"Uchlbit 1".
(h) Kxtrsota o f thoaa portions o f tha slnutaa o f tha naatlafs o f tha Board o f Olraotars o f drsaa hold oa
Daoeeibar 6, 1962 and January 3 1963 rs la tla g to tha proposed aoqulaltlon o f tha aaaata o f lo n s llts and o f thoao portions o f tha w la M ta i^r^h sw s illy ^ o f tha Board o f Blraetors o f
Zoaollta hold htt|paesaftar 13 1962 and Jansary 17 1963 rala tla c to tha propaaad aala o f tho asset o f Zonollto to Orace,
*r< m I om * MM * la th* M M w M 'B U M * 4*. (# ) A aonr o f the ftapaast fa r C o ita l Appropriation
(BOA #229) rsla ftln s to tho p iopooad ooopr t lt lw i o f ths assets o f Zoaollta as ssta ttte d to tho Baort a f Bdrsators o f Oraoa at
tha Bsetlng thereof
6*.I960 is aaslosod
with la ths folftar m*mi "BH U t JV .
..
. ;.
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D2 0025039
#
A copy of tho letter to stockholders, notleo of
special Booting and proxy statement dated January 31, 1963
forwarded by the Zonollte Company to Its stockholders in
connection with the speolal meeting of stockholders held
on March A, 1963, to authorise the sale of the aseets of
that company to Qraoe is enclosed herewith in ts folder
marked "Exhibit 4".
Copies of correspondence, memoranda, surreys,
studies and reports found in the files of Oraoe and relating
to the aequlsltlon of the assets of Zonollte are enolosed
herewith in the folder marked "Exhibit 5".
(d) A oopy of the sgrsssisnt dated January 17,
1963, between Oraoe and Zonollte presiding for the. acquisition
by Oraoe of the assets of Zonollte is attached as ftchiblt A
to the Zonollte proxy statement enclosed herewith la the
folder marked "Exhibit 4".
(e) Various product catalogs and other descrlptlre
materials relating to the products manufactured by Oresc and
Zonollte are enclosed herewith In the feller marked "tehibit 6".
Question* 3 through 11 are oadtted since they do not
relate to the acquisition of Zonollte.
.
12. The following is a list of the products of
Zonollte, together with the estimated dollar sales of each
suoh product for the fiscal year of Zonollte ending March 31,
19631 >
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D2 0025040
PRODQCT
Varalaullta Or*
| 2,080,000
Bxpandad Vriaulita
4
Lifhtwaicht Conerata and FUata* DSgrtfifu
Ho m InduIatloii^/^vv-Uv^
Carrlar for/^rtculturai Chateoili
;
Haaonry 7111 Iniulatlon
'
Jtlxsd Conatruotlon Frodasti
- r
(alll alxad piaatara far f l w p w f l m
.
and aooustloal lnsulatloa)
. *
Nlseslliaaeui b u t e m grill Im c ad
alnor paolalty usaa)
'
Tarrallta (soli oondltlonar) * ; , .
2,290,000 ` 1,720,000
900*000 . 740,000
$40,000
390,000 So.OOQ
TOTAL VBWZCULITB
Rasai Froduots
Olasa flbar Boa Znaolatlaa
Folrttyraaa fom Inaplatloa
fin ito
AltadLaui
'
TOTAL A L I mOOOCTS
TOTAL 01080 SAXJS Lassi Salsa Osteiti
TOTAL
teUl 0
. '
v -i
i
4 0,920,000
.
.
'
| 1, 600,000
'e
2r0r0ri0T0T0T
100,000
AOIOOO
" la
000 ;
'BErarisrapeatioB tr
Tandsollte Cooptar,
li astlaated thiilnu Zooolita durine tte fla
Mooiit to i g r o t e t e i i
la tte astiasti of te forth steri tea andad M t e r 31. inoluted la tte Steri
AA. 'T .
13. There a n no product or product U n i of
Greco and Zonollto which are identical or einilar la uao.
lb. (a) Thoro arc no produota manufactured by
Oraoo which nay bo uaod by Zonollto.
.
(b) Thoro aro no product which ftomollte
formerly obtained from other coopanlco which, after the ao-
quieition, may bo cuppllcd by Oraoo.
15. Vo produota or product llaoo were purchased by Grace from Zonollte In I960.
16. The following information la eubnltted in
reapoot of Zonollte*e produota, oo^otltoro and percentage of
total lnduatnr aaloo of Zonollto. The rank and poroontage
of the total lnduetry ealoe roproeootod by oaloo of Zonollto*e
material aro readily arallablo throughout the country fro*
The total Induatxy aalaa of lightweight oonerete
and plaatar aggregate fr non etraturai ueee (Including
'
haie, siate, ptadee and tiptidii alag, elay, parut and
endeialt) mounted to approxlattely 8,000,000 to 8,700,000
tona ln 1961 as. etineted tjr "Nedl*-Hrtest Flaming onda", October 1962 Issue. hile aetual aalaa figures'fer 1962 ara
not jet amiable, It la estlnated that aalaa 111 not be
lover la 1962 than ln 196I. Sonollta'a aalaa ef lightweight
oonorata and plaatar aggregate in the flaoal paar ended
Kareh 31, 1963 are eatlaated to anount ta approzlnatelr 30,000
tona or approxlaately 1.1)6 to 1.50 of tha total aartcat. Zono-
lite'a Taraiculite aggregate aalaa aeeoool fer approrl-- taly
1.06 to 1.40 of tha arloet and Ita aalaa ef partita (idtleh la
purohaaad aa ore end expended tp lanallta) a p y t a A r approx*
laataly 0.10 to 16 f the o a f t, V. .
Hone m ediation
'*
' ' ~
Ths most recent figure presently known to Qraee for total industry sales of hone insulation materials (including glass fiber, rook and slag mineral wool wood fiber, paper, polystyrene foam and veraloullte) Is the figure set forth in the "Census of Manufactures" for 1958 which was^$80,000,000.
It is reasonable to assume that the market has grown since that
time. However, using the $80,000,000 figure as a base, Zonollte's estimated home Insulation sales for the fiscal year ending March 31 1963 f $3,720,000 amount to approximately 4.7* of the market. Zonollte's sales of veraloullte hosm insulation represent 2.2* of the market and their sales of glass fiber and polystyrene foam (which are purchased from
other manufacturers and resold by Zonollte) amount to approxi
mately 2.2* and 0.3* of the market, respeotlvely.
Carrier for/Agricultural Chemicals
Zonollte's veraloullte competes with the following
e
produots as a carrier for non-fam agricultural ehemloalst perlite, ground corn oobs, oocoa sheila, pecan shells, oalolned
/
day, sand, limestone*, rice hulls end straw. Somalite's
principal competitors In this market aret
Great Lakes Carbon Johns-Nanvllle United Perlite Corp. Oneida Perlite Corp. Zn addition to the above, materials used as carriers for agricultural chemicals are readily available throughout
the oountry from many looal suppliers.
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15166226
Ih* fis# of the
narket for aarrler* of
non-fan urloniturai chanloals la not available. Acoordingly,
Zonollt#'s p#ro#ntag# of this total aarkst la not*known, iha
total
narlcat for/u ri ouiturai ohsnloals as #atiaat#d
to b# $250,000,000 annuali/ la an artlol# la *Chflado#l v##k"
scasino (yebruary 23, 1963, pac# 121). Xt is'therefore a
raasonabla inference that th# percentage of th# total Mrfcat
in carriera for non-fan acrloulturai ritieni unii rajiraaaiii ad
b/ Zonollt'a aalas in this narfcst la rar/ anali.
Masonry Pill Insulation
.
Zonollt# salla a spedali/ traat#4, watr reaiitant
expanded vmleullt# for lnsulatlnc canty alls and oonorat
blocks. This application la a nv aono#pt In building Insula
tion d#r#lop#d by Zonollt# within ths post fir# years*. sino#
th# Introduction of this oonocpt by Zonollt# othsr producta auch ss shnddod scrap styrofosa and urethane foen hers begun to b#
aarkat#d for as# In this apthod #f laswlatlan and It Is assnad that as th# a#rk#t gro# perilt# and assy othsr notorial a ill
find usag# in ibis appllaction. At yrasyrt, a# figures In
r#sp#ot of ths total m b i t ais.published or ithsrwlsa arallabl#
and until further develcipnsnt of ths Mstst lt if unlikely that
any rollati# atlante of Zsnallts'a shore osn ho detsndned.
m i l m#d Piastre Zonollt#'s m i l maned plasters for fireproofing and
aooustleal Insulation ooagete with perllt# plasters, acoustlaal
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15166227
D2 0025045
\
tile, cement encasement, lath and plaster, and sprayed on
asbestos sold by the following companies which are Zonolite's major competitors in this field:
. , " '
Armstrong Cork Co.
Asbestos Spray Corporation
Celotex Corporation
.
Columbia Acoustics & Fireproofing Co.
* Great Lakes Carbon Co.
Johns-Manville
Keasbey and Mattison Co.
National Gypsum Co.
Smith a.nd Kanzler Corporation
U. S. Gypsum Co.
Data are not available for the total annual sales of building fireproofing materials. The annual 3ales of acoustical tile as estimated in "Sound Ideas" (Summer 1962 Edition, published by the National Acoustical Contractors
Association) are $120,000,000. It is further estimated by
this publication that acoustical tile sales account for 98#
.
of the annual U. S. acoustical insulation market. Based on
these figures Zonolite's sales in the building, fireproofing and
acoustical insulation market represent less than 1.0# of the
market.
Terrallte (Soil Conditioner)
Zonolite's Terralite competes with peat moss in the
market for soil conditioners. Grace does not know of any
single large producer of peat moss. The "Minerals Yearbook, 1961"
(Volume II) states that they surveyed 123 producers in 22 states
to obtain production statistics.
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D2 0025046
. " This, publication shows that the total peat moss con sumed in the U. S. in 1961 amounted to $18,200,000. 94# of the peat moss consumed in the U. S. in 1961 was used for soil conditioning. Zonolite's estimated sales of Terralite for the fiscal year ending March 3 1 , 1962 amount to` $320,000 or approx imately 1 .8# of the total soil conditioner market. Vermiculite Ore
Vermiculite ore production in the U. S. in 1961 ac cording to the "Minerals Yearbook, 19 6 1" was 207,000 tons. In addition, 13,000 tons were imported from South Africa. Zonolite's production of vermiculite ore for the fiscal year ending March 31, 1962 was 201,000 tons or 97# of the U. S. production and imports. Other U. S. producers of vermiculite are:
American Vermiculite Co. Patterson Vermiculite Co. Golden Clover Corp. Zonolite's large hare of the U. S. vermiculite production arises out of the natural phenomenon that the largest known vermiculite deposit in the western hemisphere is in a knoll in northwestern Montana which is owned by Zonolite. Geological estimates of the reserves in this knoll Indicate that it contains sufficient ore to supply the total U. S. vermiculite usage (at the 1961 consumption rate) for 163 years. It is estimated that this single deposit represents more than 90# of the total developed vermiculite reserves in the United States.
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15166229
. However, as indicated above, vermiculite finds J
fierce competition in every market from many of the nation's
largest suppliers of construction materials and from such
4 materials as perlite, talc, glass fiber, foamed plastics, peat
moss, blas.t furnace slag, gypsum, rock wool, polystyrene foam,
asbestos, sand and many others.
f
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17. (a) Zonolite distributes vermiculite as both
.
ore and as expanded product. Approximately 55# of its ore
production ($1 ,880,000]* is sold in the unexpanded form to
Miii-
AfticucrAAu
.
homo- and--g arden fptil-ige-r-manufacturers^ miscellaneous
industrial users and 10 U. S. expanders. The expanders process
the ore by expanding the same in special furnaces and sell the
expanded material to Jobbers and dealers who are, principally,
lumber yards, building materials dealers and hardware outlets.
Approximately 10# ($3^0,000) of the ore is shipped to Canadian
and overseas expanders. The remainder of the ore (representing $1 ,190,000 of ore value or $6 ,900,000 of finished product value)
is expanded in 19 owned plants of Zonolite and is sold directly
by the Company to Jobbers and dealers. Zonolite*s resale products are also distributed through these latter channels.
<2>F Vi^T^tZcJTIOhi
f>grp 7c
^
Aove
* The sales values ascribed to the M M M g channels7are based oh the estimated sales for the fiscal year ending
March 31 1963.
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15166230 D2 0025048
. 17. (b) There are no material changes con
templated in the methods of distribution employed by Zono-
lite. Grace intends that after the acquisition the products
of Zonolite will continue to be sold to all present customers
of Zonolite. In addition, Grace will endeavor to have these
products sold through additional outlets.
r
18. Grace considers the proposed acquisition of
Zonolite to be an attractive investment for the following reasons:
Zonolite affords Grace an opportunity to invest in
a profitable business with a solid earnings base and prospects
for reasonable earnings growth. In addition it is believed
that with the opportunity to apply Grace's chemical research
technology to the vermiculite structure new properties may
be developed which will materially Increase the usefulness
of the material for presently unknown applications. For ex
ample, the profitability of the mining and milling operations
can be greatly improved by developing new markets for the finer
sizes of vermiculite. Grace hopes to accomplish this through
a well conceived research program.
It is Grace's intention to continue to employ the
' present management of the Zonolite business after the acquisition
and to continue to have the business operated as an identifiable
unit. It is contemplated that Zonolite's operations will continue
.
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N.
to be managed from Chicago and utilize the same channels of dis
tribution.
Very truly yours,
W. R. GRACE & CO.
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B y ____________________________
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