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 Graces construction products business in 2016 with New
Grace retaining the catalysts technologies and materials technologies businesses
Idea Generation: Circle of Competence 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
2012 Sales EBIT Breakdown
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 Graces 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 $ 109.84 $ 137.30
Cumulative Upside 12.06% 40.08%
Value CAGR over 3 Years 3.87% 11.89%

3
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

Current Additional
Sales Capacity
Capacity (thousand tons) 444.5 163.5
(x) Utilization 85.0% 85.0%
Volume 377.8 139.0
Price ($/ton) $3,300.0 $2,970.0
Revenue $1,246.8 $412.8
Price Change (10.0%)
EBIT Loss ($124.7) $124.7
Barriers to Entry
EBIT Margin 30.2%
Economies of Scale: 45% of cost structure is
fixed, providing high operating leverage Price Decrease (10.0%)
Demand Side Barriers: Customer specific Additional Capacity Necessary 36.8%
products create high switching costs
Albemarle attempted volume competition in 2012-2013
Technology Barriers: Specialized technology unsuccessfully and recognizes importance of pricing discipline.
with continued R&D investment necessary 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 Leading Market Positions

Long Standing Customer Relationships: Focus on core competencies has enabled Grace
Extended 3 year contract life for catalysts to become a market share leader in its products
Customer renewal rate of 70% at contract WR Grace Market Position 2008 2014
completion(1) FCC
Largest customers have specialized

Refinery
HPC EB Resid
HPC FB Resid
products and have worked with Grace for
HPC Distillate
decades
HPC Hydrocracking
Polyethylene (PE) Catalyst
Products are non-substitutable to customers PE Catalyst Support

Specialty
Polypropylene (PP) Catalyst
and small percentage of cost:(2)
PP Process Technology Licensing
Essential input for crude breakdown and PE / PP Single Site Catalyst
specialized to customers Chemical Catalysts
Zeolite Technology

Future
For refining catalysts, for barrel of oil
Biofuels Catalysts
refined, $0.15-$0.25 in catalyst cost MTO Catalysts
With total refinery cost of $4.75 per barrel,
catalyst cost represents ~4.2% of total Legend
Market Leader
costs in the refinement process(3)
Strong Position
1% of cement producers costs are additives Developing Position
No Position
Source: GRA 2014 Investor Day Presentation

1. Source: The Catalyst Group

2. Source: Anonymous, W.R. Grace Finance Manager 7
3. PBF Energy May 2014 Presentation
IV. Business Model: Competitive Advantages

Technical Barriers to Entry Technical Advantages

Graces products are non-commodity with Technical advantages of Graces product results
individual customer customization in economic uplift of $0.40/bbl(1)
New catalyst products have research life cycles of Competitive Base W.R. Grace
at least 1 year C/O Ratio 6.9 6.4
Conversion, wt% 76.0 77.4
Dry Gas, wt% 1.0 1.0
Extensive research by my team is necessary to create
LPG, wt% 18.3 18.6
superior technology that meets specific needs. Product
Gasoline 54.2 55.3
customization is a requirement for us to succeed.
LCO, wt% 17.2 16.9
Anonymous, Senior Principal Engineer, W.R. Grace Bottoms, wt% 6.8 5.7

Economies of scale from R&D expenditures

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

8
IV. Business Model: Recession Protection

Recession protection Above-cycle utilization

Through the 2008 recession, Grace experienced Industry has a current utilization of 94.6% while
only a 15% revenue reduction while increasing normalized cyclical utilization is 85.0%
operating margins due to pricing power
Above average utilization allows the business to
Overall improvement in margins since 2010 benefit from increased operating leverage
highlights operating leverage, sustained ROIC,
and nimble supply chains Difficulty of supply coming online provides a
favorable supply/demand backdrop (demand
W.R. Grace Key Operating Metrics expected to grow 3.0% annually)
3500 40.0%
Key Value
35.0%
3000
Market Size ($mm)* $2,622.0
30.0%
2500 FCC Cost ($/mt)** $3,300.0
25.0%
2000 Sales Volume ('000s mt) 794.5
$mm

20.0%
1500 Annual Capacity ('000s mt)*** 839.5
15.0%
Utilization 94.6%
1000
10.0%
Typical Utilization**** 85.0%
500 5.0%
Deviation from Norm 11.3%
0 0.0%
*A lb emarle IR P res entatio n
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
**C hemical W eek
***Letz s ch C o ns ulting
Revenue Gross Margin % ****T he C atalys t G ro up

EBITDA Margin % EBIT Margin %

9
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
Activist investors
own 27.7% shares
Engaged shareholder
base improves capital
allocation and creates
value enhancement
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
Graces $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
Incentivized Management
Fred Festa, CEO and Chairman of W.R. Grace,
has a $14.9mm position in Grace common stock
Festas 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
Business Reinvestment
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. Graces 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
N O L D C F 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 3375.1 3511.3 3651.0 3793.4 3937.7 4083.3 4229.3
EBIT 667.0 710.0 754.9 801.5 838.2 874.9 911.3
US EBIT 200.1 213.0 226.5 240.5 251.4 262.5 273.4
Interest Payments -59.3 -59.3 -59.3 -59.3 -59.3 -59.3 -59.3
US EBI (Pre-Tax Income) 140.8 153.7 167.2 181.1 192.1 203.1 214.1

Beginning US NOL Balance 1800.0 1659.2 1505.5 1338.3 1157.2 965.0 761.9
NOL Carryforw ard Usage -140.8 -153.7 -167.2 -181.1 -192.1 -203.1 -214.1
Ending US NOL Balance 1659.2 1505.5 1338.3 1157.2 965.0 761.9 547.8

Statutory Tax Rate 35% 35% 35% 35% 35% 35% 35%

Beginning DTA Balance 630.0 580.7 526.9 468.4 405.0 337.8 266.7
DTA Change -49.3 -53.8 -58.5 -63.4 -67.2 -71.1 -74.9
Ending DTA 580.7 526.9 468.4 405.0 337.8 266.7 191.7

Discount Factor 0.922 0.850 0.784 0.723 0.666 0.614 0.566

Discounted Value 45.4 45.7 45.9 45.8 44.8 43.7 42.4

Discount Rate 8.46% WACC

NPV of NOLs ($mn) 408.1

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
Post-Reorganization Equity
Extended 13 year Chapter 11 process due
to asbestos litigation has resulted in limited
coverage for Company besides investment
positions by distressed funds
Excess Asset Value
Sell side overlooks excess assets including
excess cash ($500.0mm) and excess
investment in unconsolidated affiliate
($173.8mm)
Provides additional 8.4% upside
Margin improvement is underestimated
Managements ability to improve the margin
post-restructuring is not modeled into sell-
side valuation
Margin expansion by 300 basis points
provides 16.7% incremental returns
14
Catalysts
Spin-off of Grace Construction Products
Separation of GCP will provide natural
shareholder turnover, lead to normalized
multiples expansion, and address double
cyclicality valuation challenges
Shareholder Friendly Measures
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
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. Graces 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 Special Thanks To:
Anonymous Senior Principal Engineer Justin Ang
Rosanne Schiller Director of Marketing Sahil Khetpal
David Joseph Investor Relations Dominic Waltz
Tania Almond Investor Relations

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.
Sell-Side 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
Anonymous Goldman Sachs sources. We have not independently verified this information and we make no
representations as to the accuracy or correctness of any such information. We
Anonymous Credit Suisse undertake no obligation to update any information below.

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
Extended Chapter 11 process has resulted
in extended financial and reputational
damage to Company
Alternative fuel sources provide tail risk for
WR Graces operations
Bearish outlook on energy-related industries
Market is focused on short term EPS vs.
earnings quality
Sell-side operates in sector specific
pigeonholes of chemicals vs construction
19
Our Perspective
Reorganized Company has minimal
exposure to asbestos litigation and long
term contract redemption rates are steady
Secular tailwinds from renewed focus on
heavy oil refinement will drive volume sales
due to inelastic demand
W. R. Grace benefits from lower crude
prices due to increased catalyst demand by
refineries
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
X. Appendix: Specialty Building Materials & Packaging Industry

Demand Driven Building Products High Value Packaging Products

Commercial construction recovery in US Conformation to Food & Beverage industry

and emerging markets infrastructure build- regulations
out creating demand for specialty building Focus on design for convenience and
materials sustainability
Increasing quality and sustainability of Solutions address shift away from BPA
construction projects relies on advanced epoxy resins towards green products
products
Products are integrated into customer
Waterproofing Systems plants and supply chains
Roofing products
Consumer Packaging Sealants Market Size
3,000 %
CAGR: 4.1
2,500
$millions 2,000

1,500

1,000

500

0
2012 2013 2014 2019

1. BCC Research
20
X. Appendix: Specialty Construction Products Industry

Highly Localized Ongoing Secular Global Growth

Primary products are Cement Additives and Specialty cement products are critical for cement
Concrete Admixtures manufacturers to enhance quality
Fragmented industry with few dominant players Expansion in cement capacity from NA
Grace has manufacturing facilities across construction revival, emerging market growth
the world, creating high quality global brand Matching Supply/Demand characteristics imply
stable, growing prices
Graces advanced products cater to efficiency,
Cement Additives Concrete Admixtures Market environmental concerns
Marketshares Share
Global Cement Trends
6,000,000,000 120.00

Cement Pouction (metic tons)

18% 15% 5,000,000,000 100.00
6%
8%
5% 4,000,000,000 80.00

71% 7%

Price
3,000,000,000 60.00
70%
2,000,000,000 40.00

1,000,000,000 20.00
Grace Sika BASF Othes BASF Grace Sika Others
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

2020
2030
Production Unit value ($/t)

21
X. Appendix: Valuation

Sum of the Parts

Base Case Base Case + Share Repurchases

Multiple EV Multiple EV
Segment 2015E EBITDA Low High Low High Segment 2015E EBITDA Low High Low High
New Grace $ 652.3 10.0x 12.0x $ 6,523.1 $ 7,827.7 New Grace $ 652.3 10.0x 12.0x $ 6,523.1 $ 7,827.7
New GCP $ 177.3 8.0x 10.0x $ 1,418.1 $ 1,772.7 New GCP $ 177.3 8.0x 10.0x $ 1,418.1 $ 1,772.7

Core Enterprise Value 9.6x 11.6x 7,941.2 9,600.4 Core Enterprise Value 9.6x 11.6x 7,941.2 9,600.4
Plus: Excess Cash 500.0 500.0 Plus: Excess Cash - -
Plus: Excess Investments 173.8 173.8 Plus: Excess Investments 173.8 173.8
Plus: Value from NOLs 408.2 408.2 Plus: Value from NOLs 408.2 408.2
Adjusted Enterprise Value $ 9,023.3 $ 10,682.4 Adjusted Enterprise Value $ 8,523.3 $ 10,182.4
Less: Debt 2,015.8 2,015.8 Less: Debt 2,015.8 2,015.8
Total Equity Value $ 7,007.5 $ 8,666.6 Total Equity Value $ 6,507.5 $ 8,166.6

Fully Diluted Shares Outstanding (MM) 72.6 72.6 Fully Diluted Shares Outstanding (MM) 72.6 72.6
Less: Share Repurchase Program 0.0 0.0 Less: Share Repurchase Program 5.1 5.1
Total Shares Outstanding 72.6 72.6 Total Shares Outstanding 67.5 67.5

SOTP Equity Value $ 96.52 $ 119.38 SOTP Equity Value $ 96.41 $ 120.99
Cumulative Upside -1.53% 21.79% Cumulative Upside -1.64% 23.43%
Value CAGR over 3 Years -0.51% 6.79% Value CAGR over 3 Years -0.55% 7.27%

Base Case + Share Repurchases + Margin Expansion

Multiple EV
Segment 2015E EBITDA Low High Low High
New Grace $ 716.4 10.0x 12.0x $ 7,164.3 $ 8,597.2
New GCP $ 210.4 8.0x 10.0x $ 1,683.5 $ 2,104.3

Core Enterprise Value 9.5x 11.5x 8,847.8 10,701.5

Plus: Excess Cash - -
Plus: Excess Investments 173.8 173.8
Plus: Value from NOLs 408.2 408.2
Adjusted Enterprise Value $ 9,429.8 $ 11,283.6
Less: Debt 2,015.8 2,015.8
Total Equity Value $ 7,414.0 $ 9,267.8

Fully Diluted Shares Outstanding (MM) 72.6 72.6

Less: Share Repurchase Program 5.1 5.1
Total Shares Outstanding 67.5 67.5

SOTP Equity Value $ 109.84 $ 137.30

Cumulative Upside 12.06% 40.08%
Value CAGR over 3 Years 3.87% 11.89%

22
X. Appendix: Valuation

Multiples Valuation Comps

Company Enterprise Revenue (USD) EBITDA (USD) EV/EBITDA
Name Value 2013A 2014A 2015E 2013A 2014A 2015E 2013A 2014A 2015E
New Grace Comps 0
Albemarle Corporation (NYSE:ALB) 6,505.5 2,519.2 2,394.3 2,445.5 705.4 428.7 899.7 9.22x 15.17x 7.23x
Johnson Matthey plc (LSE:JMAT) 11,512.2 16,071.3 16,710.0 15,661.9 781.0 860.7 863.0 14.74x 13.38x 13.34x
Clariant AG (SWX:CLN) 8,112.6 6,390.2 6,432.3 6,261.8 820.3 833.0 894.4 9.89x 9.74x 9.07x

New GCP Comps

Forbo Holding AG (SWX:FORN) 2,021.6 1,199.7 1,226.8 1,192.6 172.1 183.9 186.5 11.75x 10.99x 10.84x
Sika AG (SWX:SIK) 9,419.4 5,408.1 5,859.4 5,833.3 697.8 823.3 901.3 13.50x 11.44x 10.45x

23
X. Appendix: Valuation
Operating Model Base Case
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
Revenue
Refining Catalysts 742.0 1077.5 986.8 832.4 845.5 873.6 903.5 935.6 969.8 1006.4 1045.5 1087.3
Growth Rate % 45.2% -8.4% -15.6% 1.6% 3.3% 3.4% 3.5% 3.7% 3.8% 3.9% 4.0%
Polyolefin and Chemical Catalysts 240.3 269.8 281.3 291.6 401.3 445.4 489.2 531.6 571.5 607.7 639.1 664.7
Growth Rate % 12.3% 4.3% 3.7% 37.6% 11.0% 9.8% 8.7% 7.5% 6.3% 5.2% 4.0%
Catalysts Technologies 982.3 1347.3 1268.1 1124.0 1246.8 1319.0 1392.8 1467.2 1541.3 1614.1 1684.6 1752.0
Growth Rate % 37.2% 1.0% -11.4% 10.9% 6.1% 5.6% 5.3% 5.1% 4.7% 4.4% 4.0%
Materials Technologies 819.4 872.6 862.6 878.5 890.6 914.9 939.8 965.4 991.7 1018.7 1046.5 1075.0
Growth Rate % 6.5% 1.0% 1.8% 1.4% 2.7% 2.7% 2.7% 2.7% 2.7% 2.7% 2.7%
Revenue 1801.7 2219.9 2130.7 2002.5 2137.4 2233.9 2332.6 2432.6 2533.0 2632.9 2731.1 2827.0
Construction Revenue 873.3 992.0 1024.8 1058.2 1105.6 1138.8 1172.9 1208.1 1244.4 1281.7 1320.1 1359.7
Growth Rate % 13.6% 3.3% 3.3% 4.5% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0%
Total Revenue 2675.0 3211.9 3155.5 3060.7 3243.0 3372.6 3505.5 3640.7 3777.4 3914.5 4051.3 4186.8

EBITDA
Catalysts Technologies 288.3 441.3 447.8 381.7 444.6 483.5 524.5 567.2 595.9 624.0 651.3 677.3
Margin % 29.3% 32.8% 35.3% 34.0% 35.7% 36.7% 37.7% 38.7% 38.7% 38.7% 38.7% 38.7%
Materials Technologies 191.8 189.6 191.5 213.2 217.3 224.7 232.3 240.1 248.2 256.6 265.2 274.1
Margin % 23.4% 21.7% 22.2% 24.3% 24.4% 24.6% 24.7% 24.9% 25.0% 25.2% 25.3% 25.5%
Corporate -108.1 -89.1 -81.2 -68.4 -60.6 -63.4 -66.2 -69.0 -71.9 -74.7 -77.5 -80.2
Margin % -6.0% -4.0% -3.8% -3.4% -2.8% -2.8% -2.8% -2.8% -2.8% -2.8% -2.8% -2.8%
New Grace EBITDA 372.0 541.8 558.1 526.5 601.3 644.8 690.6 738.3 772.2 805.9 839.0 871.2
Construction EBITDA 18% 199.3 205.3 211.4 217.8 224.3 231.0 238.0
Total EBITDA 844.1 895.9 949.7 990.0 1030.2 1070.0 1109.2
Margin % 25.0% 25.6% 26.1% 26.2% 26.3% 26.4% 26.5%
Consensus Margin % 23.7% 24.6% 25.3%
Difference 1.3% 1.0% 0.8%

EBIT
Catalysts Technologies 239.6 388.8 393.8 327.5 378.3 409.4 442.1 476.0 510.8 534.9 558.3 580.6
Margin % 24.4% 28.9% 31.1% 29.1% 30.3% 31.0% 31.7% 32.4% 33.1% 33.1% 33.1% 33.1%
Materials Technologies 160.0 158.7 162.0 181.8 185.2 191.8 198.7 205.7 213.1 220.6 228.4 236.5
Margin % 19.5% 18.2% 18.8% 20.7% 20.8% 21.0% 21.1% 21.3% 21.5% 21.7% 21.8% 22.0%
Corporate (New Grace) -109.9 -90.9 -82.9 -72.1 -65.2 -68.2 -71.2 -74.3 -77.3 -80.4 -83.4 -86.3
Margin % -6.1% -4.1% -3.9% -3.6% -3.1% -3.1% -3.1% -3.1% -3.1% -3.1% -3.1% -3.1%
Construction Products 89.9 97.3 125.2 151.7 161.7 168.2 174.9 181.7 188.6 195.5 202.5 209.3
Margin % 3.0% 4.0% 5.0% 5.0% 5% 5% 5% 5% 5% 5% 5%
Corporate (Full) -163.1 -131.5 -122.8 -110.2 -99.0 -103.0 -107.0 -111.1 -115.3 -119.5 -123.7 -127.8
Margin -3.1% -3.1% -3.1% -3.1% -3.1% -3.1% -3.1%
Total EBIT 626.2 666.5 708.6 752.3 797.2 831.6 865.5 898.7
US EBIT 30.0% 199.9 212.6 225.7 239.2 249.5 259.7 269.6
EBIT on New Grace 289.7 456.6 472.9 437.2 498.3 533.1 569.6 607.5 646.6 675.2 703.4 730.8

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

24
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
Revenue 2675.0 3211.9 3155.5 3060.7 3243.0 3375.1 3511.3 3651.0 3793.4 3937.7 4083.3 4229.3
EBIT 667.0 710.0 754.9 801.5 838.2 874.9 911.3
US EBIT 200.1 213.0 226.5 240.5 251.4 262.5 273.4
Interest Payments -59.3 -59.3 -59.3 -59.3 -59.3 -59.3 -59.3
US EBI (Pre-Tax Income) 140.8 153.7 167.2 181.1 192.1 203.1 214.1

Beginning US NOL Balance 1800.0 1659.2 1505.5 1338.3 1157.2 965.0 761.9
NOL Carryforw ard Usage -140.8 -153.7 -167.2 -181.1 -192.1 -203.1 -214.1
Ending US NOL Balance 1659.2 1505.5 1338.3 1157.2 965.0 761.9 547.8

Statutory Tax Rate 35% 35% 35% 35% 35% 35% 35%

Beginning DTA Balance 630.0 580.7 526.9 468.4 405.0 337.8 266.7
DTA Change -49.3 -53.8 -58.5 -63.4 -67.2 -71.1 -74.9
Ending DTA 580.7 526.9 468.4 405.0 337.8 266.7 191.7

Discount Factor 0.922 0.850 0.784 0.723 0.666 0.614 0.566 Remaining Value
Discounted Value 45.4 45.7 45.9 45.8 44.8 43.7 42.4 94.4

Discount Rate 8.46% WACC

NPV of NOLs ($mn) 408.1

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 49.2 53.6 58.2 62.9 66.6 70.1 73.6 0.0 0.0
Marginal Tax Rate 35% 35% 35% 35% 35% 35% 35% 35% 35%
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 2 0 19 E 2020E 2 0 2 1E CV
EBIT on New Grace 289.7 456.6 472.9 437.2 498.3 533.1 569.6 607.5 646.6 675.2 703.4 730.8
Tax Rate 35% 35% 35% 35% 35% 35% 35%
EBI After Tax 346.5 370.2 394.9 420.3 438.9 457.2 475.1
Catalysts Technologies 48.7 52.5 54 54.2 66.3
Materials Technologies 31.8 30.9 29.5 31.4 32.1
Corporate 2.6 2.6 2.6 5.7 7
(+) D&A 83.1 86 86.1 91.3 105.4 111.8 121.0 130.8 125.7 130.7 135.6 140.4
NWC 289.3 387.8 353.6 240.7 379.2 394.4 409.9 425.7 441.7 457.7 473.7 489.6
% of Revenues 11% 12% 11% 8% 12% 12% 12% 12% 12% 12% 12% 12%
(-) NWC (49.70) (98.50) 34.20 112.90 (138.50) (15.16) (15.54) (15.81) (15.98) (16.04) (15.99) (15.84)
(-) Capex -83.8 -90.8 -98.1 -94.2 -98.0 -101.7 -105.3
Cash Flow Before Tax Refund 359.3 384.9 411.8 435.7 455.5 475.1 494.3 '21
Tax Refund 49.2 53.6 58.2 62.9 66.6 70.1 73.6 Term inal Value Grow th
Free Cash Flow 408.5 438.6 470.0 498.6 522.1 545.2 567.9 11843.1 3.50%
Discount Factor 0.922 0.850 0.784 0.723 0.666 0.614 0.566 0.566
Discounted Value 376.6 372.8 368.3 360.3 347.8 334.9 321.6 6706.4
New Grace EV 9188.7
New GCP EV 1893.9 *Based on m ultiples
Excess Investments 673.8 *Unconsolidated affiliate and excess cash
Key DCF Metrics
Debt 2015.8
Equity Beta 1.066
Total Equity Value 9740.7
Shares Outstanding 67.5 Beta After Mean Reversion 1.044
Value Per Share $ 144.31 Yield on 10% Treasury Note 0.023
Equity Cost of Capital 9.6%

Debt Cost of Capital 4.05% L+350

Market Cap 7218.8

Total Enterprise Value 8683.2
Net Debt 1464.4

WACC 8.46%

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 CV
Total Revenue 2675.0 3211.9 3155.5 3060.7 3243.0 2762.0 2615.3 2759.2 3200.6
growth % 20.1% -1.8% -3.0% 6.0% -14.8% -5.3% 5.5% 16.0%

EBITDA 372.0 541.8 558.1 526.5 601.3 275.3 375.5 401.9 511.2
margin % 13.9% 16.9% 17.7% 17.2% 18.5% 10.0% 14.4% 14.6% 16.0%

EBIT on New Grace 289.7 456.6 472.9 437.2 498.3 185.6 285.8 312.2 421.4
margin % 10.8% 14.2% 15.0% 14.3% 15.4% 6.7% 10.9% 11.3% 13.2%

EBIT on New Grace 289.7 456.6 472.9 437.2 498.3 185.6 285.8 312.2 421.4
Tax Rate 15.0% 15.0% 15.0% 15.0% *NOL Projection
EBI After Tax 157.7 242.9 265.3 358.2
(+) D&A 83.1 86 86.1 91.3 105.4 89.8 89.8 89.8 89.8
% of Rev 3.1% 2.7% 2.7% 3.0% 3.3% 3.3% 3.4% 3.3% 2.8%
(-) NWC -49.7 -98.5 34.2 112.9 -138.5 56.25 17.15 (16.82) (13.10) '18
(-) Capex -89.8 -89.8 -89.8 -89.8 Term inal Value Grow th
Free Cash Flow 214.0 260.1 248.5 345.1 7197.2 3.50%
Discount Factor 0.922 0.850 0.784 0.723 0.723
Discounted Value 197.3 221.1 194.8 249.4 5200.4
New Grace EV 6062.9 Key DCF Metrics
New GCP EV 1820.3 *Based on m ultiples Equity Beta 1.066
Excess Investments 673.8 Beta After Mean Reversion 1.044
Debt 2015.8 Yield on 10% Treasury Note 0.023
Total Equity Value 4720.9 Equity Cost of Capital 9.6%
Shares Outstanding 67.4
Value Per Share $ 70.07 Debt Cost of Capital 4.05% L+350

Market Cap 7218.8

Total Enterprise Value 8683.2
Net Debt 1464.4

WACC 8.46%

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
X. Appendix: Valuation

DCF Sensitivities
Base Case Sensitivity Bear Case Sensitivity
Terminal Grow th Rate Terminal Grow th Rate
WACC 2.5% 3.0% 3.5% 4.0% 4.5% WACC 2.5% 3.0% 3.5% 4.0% 4.5%
9.5% $108.9 $114.3 $120.5 $127.9 $136.8 9.5% $45.3 $49.3 $53.9 $59.5 $66.1
9.0% $116.8 $123.3 $130.9 $140.0 $151.1 9.0% $50.5 $55.3 $60.9 $67.6 $75.9
8.5% $126.1 $133.9 $143.3 $154.8 $169.1 8.5% $56.6 $62.4 $69.3 $77.7 $88.2
8.0% $137.1 $146.7 $158.5 $173.2 $192.1 8.0% $63.9 $70.9 $79.5 $90.2 $104.0
7.5% $150.2 $162.3 $177.5 $196.9 $222.9 7.5% $72.6 $81.3 $92.3 $106.3 $125.1

Terminal Grow th Rate Terminal Grow th Rate

WACC 2.5% 3.0% 3.5% 4.0% 4.5% WACC 2.5% 3.0% 3.5% 4.0% 4.5%
9.5% 11.1% 16.6% 22.9% 30.5% 39.5% 9.5% (52.7%) (48.5%) (43.7%) (37.9%) (31.0%)
9.0% 19.2% 25.8% 33.5% 42.8% 54.2% 9.0% (47.3%) (42.3%) (36.4%) (29.4%) (20.7%)
8.5% 28.6% 36.6% 46.2% 57.9% 72.5% 8.5% (40.9%) (34.9%) (27.7%) (18.9%) (7.9%)
8.0% 39.8% 49.7% 61.7% 76.7% 96.0% 8.0% (33.3%) (26.0%) (17.0%) (5.8%) 8.6%
7.5% 53.3% 65.6% 81.1% 100.9% 127.4% 7.5% (24.2%) (15.1%) (3.7%) 11.0% 30.6%

28