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BASF AG Offers $4.9 Billion for N.J. Materials Company

Posted on: Wednesday, 4 January 2006, 18:00 CST

By BONNIE PFISTER

BASF AG offers $4.9 billion for N.J. materials company

TRENTON, N.J. BASF AG, one of the worlds largest chemical companies, said Tuesday it has made an unsolicited $4.9 billion cash bid for Engelhard Corp., a New Jersey surface and materials science company.

Engelhard shares climbed 26 percent.

Engelhards board urged its shareholders to take no action at this time on the BASF takeover proposal while it reviews the deal.

Consistent with its fiduciary duties, the companys board will meet to review and consider BASFs proposal and will make a recommendation to stockholders in due course, the company based in Iselin, N.J., said in a statement after the markets closed.

BASF, of Ludwigshafen, Germany, said its failure over the holidays to persuade Engelhard to accept a merger deal prompted its $37 per share offer directly to stockholders.

The deal could be sweetened by an additional dollar per share, BASF said, if Engelhard officials are willing to discuss details of a friendly acquisition.

Engelhard shares soared $7.85 to close at $38 on the New York Stock Exchange, well above its 52-week high of $31.87 and its highest level in at least a decade. Shares of BASF fell 1.4 percent to close at 63.90 euros ($76.78) in Frankfurt trading.

By using substances called catalysts to change the structure and surface characteristics of materials, Engelhard develops and markets industrial emission-control technologies.

Those technologies allow petrochemical, pharmaceutical and other manufacturers to improve productivity and emit fewer pollutants.

By acquiring Engelhard, BASF would become a leading provider worldwide in the fast-growing catalyst market and combine the firms research and development arms.

Debt ratings agency Standard & Poors placed BASFs credit on watch with negative implications, saying it has reduced its financial flexibility by spending money on shareholder outlays and a proposed purchase of chemical construction company, Degussa AG.

The catalyst market is one that is certain to grow, given new environmental regulations taking effect around the world between 2007 and 2009, said Dimitry Silversteyn, an analyst with Longbow Research in Cleveland.

Engelhard may be projecting that it can get its stock price to the high $30 range per share or more based on that growth, Silversteyn theorized, or that other bidders might be interested and push the purchase price higher still.

From Engelhards point of view this looks like a fair deal and Im a little bit surprised that its gone to a tender offer rather than being a negotiated deal, Silversteyn said.

Source: Advocate; Baton Rouge, La.

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