BASF sets ultimatum after extending Engelhard bid
Mon May 1, 2006 1:57 PM ET
FRANKFURT, May 1 (Reuters) - German chemicals group BASF said it would abandon its near $5 billion bid for U.S. catalyst maker Engelhard Corp. if it fails to win support after extending the offer by five weeks on Monday.
Engelhard has rejected BASF's bid, which the German company raised to $38 a share from $37, and unveiled a plan to buy back some of its shares at $45.
"The response to BASF's unsolicited $37 tender offer demonstrates that Engelhard shareholders will not sell the company at an inadequate price, and we believe that our shareholders will also recognize that BASF's $38 per share offer fails to adequately reflect the current value and future growth prospects of our company," Engelhard said in a statement that continued to urge its shareholders reject the offer.
BASF said it intended to nominate five directors for election to Engelhard's board of directors at Engelhard's annual meeting on June 2, but would allow the offer to expire if the shareholders did not vote for BASF's nominees.
"If Engelhard's shareholders don't vote in favour of our nominees, we will allow our tender offer to expire on June 5 and turn our attention to other opportunities," BASF Chief Executive Juergen Hambrecht said in the statement.
Hambrecht said the election of BASF nominees to Engelhard's board was intended to facilitate the BASF offer and terminate Engelhard's proposed buyback of shares.
"When the Engelhard shareholders elect our nominees, they will have spoken in favour of that result," said Hambrecht.
A failure to buy Engelhard would force BASF to look harder at other specialty chemicals assets that are available. An industry source told Reuters last month that BASF was among suitors looking at Cognis, a German company owned by Goldman Sachs Capital Partners and private equity firm Permira.
The offer for Engelhard, which expired last Friday but has now been extended, represents the biggest takeover bid in the 140-year history of BASF, the world's largest chemicals company by sales.
BASF wants to buy Engelhard to strengthen its position in the lucrative pollution control market, reduce the cyclicality of its portfolio and deploy some of the cash generated by its highly integrated manufacturing processes.
It continues a change in BASF's policy of avoiding big acquisitions, a departure which began with the purchase of Degussa's construction chemicals unit for 2.7 billion euros in March.
BASF announced its offer for Engelhard on Jan. 3 but the Engelhard board has consistently opposed the offer.
In March BASF agreed to sign a confidentiality clause that allowed it access to Engelhard's books, a move then thought to open the way to a negotiated deal.
But Engelhard rejected the raised BASF offer last week. Its shares were down 6 cents at $38.35 in afternoon New York Stock Exchange trade.
The Engelhard bid is expected to be one of the key points of BASF's quarterly results statement on Thursday.
According to the average of 18 analysts' estimates in a Reuters poll, BASF is set to post a 7 percent rise in quarterly operating earnings thanks to buoyant crude prices that boosted profit at its oil and gas unit.
The company is expected to report earnings before interest and tax (EBIT) and before special items of 1.67 billion euros ($2.1 billion) for the first quarter.
Sales are set to rise 10 percent to 11.1 billion euros. (Additional reporting by Ben Berkowitz in New York)
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