Engelhard Rejects Sweetened BASF Offer

ISELIN, N.J. – Chemicals company Engelhard Corp. said Wednesday its board has unanimously rejected a sweetened takeover bid by BASF AG, and unveiled a recapitalization plan that calls for the repurchase of up to 20 percent of the company’s outstanding shares.

Engelhard said the German chemicals company raised its bid to $38 per share from $37 but the board still feels the offer is “inadequate” and fails to recognize the company’s “current performance or future prospects.”

Its shares rose 38 cents to $38.68 in premarket activity. The company separately announced higher earnings for the first quarter.

Engelhard plans to repurchase 26 million shares at $45 apiece, deeming the action a more attractive option for shareholders than BASF’s offer. The company also said it would undertake “incremental cost savings” that should cut costs by about $15 million per year starting in 2007. These moves are part of a plan launched in January to study alternatives in response to the bid from BASF.

BASF launched its $37 per share bid on Jan. 3, and had said it was prepared to raise its takeover offer to as much as $38. The response from Engelhard shareholders to BASF’s tender offer had been tepid so far.

Asked for a response to Engelhard’s latest moves, BASF spokesman Daniel Smith said, “We’re looking at it, and we’re considering all options. We welcome the fact that there’s no other bidder. “

“We believe that our offer is the more attractive one,” he said.

In its earnings report, Engelhard said earnings for the first quarter rose on strong demand for its emission-controls and other products.

Net income increased to $69 million, or 55 cents per share, from $58 million, or 47 cents per share, a year ago. The company said costs related to the unsolicited offer from BASF reduced profit for the latest quarter by 5 cents per share.

Sales rose to $1.46 billion from $1.02 billion.

Engelhard’s results topped its own forecast of 47 cents to 51 cents per share and that of analysts, who were expecting, on average, a profit of 52 cents per share on revenue of $1.17 billion.

Engelhard said growth in emission-control technologies, such as catalytic converters, for “certain mobile-source markets” raises operating results at its environmental technologies unit, while growth in most chemical catalyst markets and strong demand from refining companies led to a strong performance at its process technologies division.