• E-mail
• Print
• Comment
• Font Size
• Digg
• del.icio.us
• Discuss article

BASF in $4.9 Billion Takeover Bid Clean-Air Company is Target of Offer

Posted on: Thursday, 5 January 2006, 12:00 CST

By Jeremy W. Peters

The BASF Group of Germany, the world's largest chemical maker, made a hostile takeover bid of $4.9 billion for Engelhard, an American company that developed the catalytic converter for cars.

Engelhard, based in Iselin, New Jersey, specializes in manufacturing clean-air technology. It urged that shareholders "take no action at this time" on the offer, which would represent a premium of about 23 percent over Engelhard's closing price at the end of the year. BASF first reached out to Engelhard on Dec. 21 but was rebuffed.

By taking its offer directly to shareholders and trying to circumvent Engelhard's board, BASF is acting unusually for a corporation in Germany, where hostile takeovers are rare.

"We think this is a very attractive offer to all shareholders which they should very seriously consider," Jurgen Hambrecht, the chairman of BASF, said during a conference call with analysts and reporters on Tuesday.

Engelhard issued a statement late Tuesday saying its board would meet to discuss the offer and make a recommendation to shareholders "in due course."

Analysts said the offer was a practical move for BASF, which is looking to expand its operations in a competitive global economy.

Michael Sison, an analyst with KeyBanc Capital Markets, said of BASF: "I think they're buying Engelhard because the growth potential over the next couple years is pretty compelling. The price is good for Engelhard and it shows the strength Engelhard has."

Shares of Engelhard rose $7.85 to $38 Tuesday after the news of BASF's offer. Shares of BASF fell 96 euro cents, or 1.5 percent, to 63.19, or $75, in trading Wednesday in Frankfurt.

The all-cash offer of $4.9 billion, which represents $37 a share, is the largest BASF has ever made for an acquisition. Hambrecht said the company's move was part of a wider plan for expanding the technologies the company sells.

"This altogether certainly will enlarge our platform, will speed up innovation, will help our customers," he said in the interview. Globally, Engelhard makes approximately one-third of all catalytic converters installed in vehicles. The catalytic converter revolutionized the auto industry in the 1970s by breaking down harmful gases, like carbon monoxide, that car engines produce. Today the converter is credited with significantly reducing smog and air pollution.

BASF does not manufacture catalytic converters but uses a similar pollution-reduction system in its chemical production process.

Its acquisition of Engelhard would extend its reach into the auto industry. BASF already makes chemicals commonly used in vehicle cooling and braking systems.

BASF, based in Ludwigshafen, Germany, posted net income of $971 million in the third quarter, doubling its profit over the same period a year earlier.

Last month, BASF acquired the American plastics engineering division of the Italian manufacturer LATI Industria Termoplastici. In November, BASF bought the division of the German company Rhenania Coatings that makes protective coatings for steel and aluminum.

Over the last two years, the share price of BASF has risen by more than a quarter, while Engelhard's has remained relatively unchanged.

In its Dec. 21 meeting with Engelhard's chairman, Barry Perry, BASF offered $37 a share and said it might be willing to raise that by $1

Hambrecht said that he did not anticipate much resistance from Engelhard's shareholders. BASF said that if it was successful in acquiring Engelhard, it did not foresee any significant job cuts at Engelhard's headquarters.

Source: International Herald Tribune

More News in this Category