BASF patience stretched on Engelhard deal-analysts
Fri Mar 10, 2006 11:31 AM ET
FRANKFURT, March 10 (Reuters) - Germany's BASF AG may choose to walk away from its $4.9 billion hostile bid for U.S. catalyst maker Engelhard Corp rather than play a waiting game, analysts said on Friday.
BASF's bid in January for Engelhard was the biggest in its 140-year history and widely hailed by analysts as a bold move to strengthen its position in the potentially lucrative market for pollution control.
But Engelhard rejected the bid and offered BASF access to its books only on condition that the German firm signs a confidentiality agreement.
BASF refused, accusing Engelhard of delaying tactics, and any prospect of an agreed deal has receded.
Its present offer to Engelhard shareholders, already extended twice, runs out next Friday. A decision on what to do next is expected around that time.
"(BASF CEO Juergen) Hambrecht and the whole BASF management board have some principles. They've made an offer at $37 and will at some point say: take it or leave it," said Dresdner Kleinwort Wasserstein analyst Christian Faitz.
"In my view they will walk away from it. Waiting Engelhard out could be lengthy and costly."
Other analysts say that if BASF were to pull out, it would send Engelhard shares down sharply.
"BASF's playing hard ball," said ING analyst Paul Satchell. "They will be prepared to walk away and then maybe come back in a few months. As we get closer to March 17, I assume that the (Engelhard) share price will fall and hedge funds will worry about losing out."
Engelhard shares were up 0.3 percent to $39.55 at 1542 GMT, a premium to BASF's offer price of $37, indicating some in the market still think BASF will improve its terms to get its target's agreement -- or another bid will emerge.
BASF shares were flat at 62.60 euros at 1541 GMT.
An Engelhard spokesman declined to name any other bidders for the company and said he welcomed any participation by BASF in a process of looking at strategic alternatives for Engelhard, as long as it secured a favourable outcome for the U.S. firm's shareholders.
"We will complete the process without BASF if we cannot come to a conclusion with them on the confidentiality agreement," he added.
Analysts say it is significant that BASF last chose to extend the offer by 10 working days rather than the usual 20, and a BASF spokesman confirmed the company wanted to send a signal. "That was a signal that we are not willing to play tactical games and that our patience is not infinite," he said.
"Engelhard is playing for time, trying to delay the process. We still have a strong interest in acquiring Engelhard as it makes a lot of strategic sense, but we're not willing to pay an unacceptable price and cannot extend the process indefinitely."
BASF could also extend its offer and start a so-called "consent solicitation" process that involves canvassing shareholders to get Engelhard's by-laws changed and increase the size of the board.
BASF could then get its nominees elected to the Engelhard board and disable Engelhard's possible poison-pill defence of issuing more shares. But whether it intends to follow such a course will only become clearer in coming days.
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