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Engelhard Board Rejects Offer From BASF

Posted on: Wednesday, 26 April 2006, 18:00 CDT

WOODBRIDGE, N.J. - Chemicals company Engelhard Corp. said Wednesday its board has unanimously rejected a sweetened takeover bid worth about $4.94 billion from 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 had already been trading above the new offer and rose 20 cents to close at $38.50 on the New York Stock Exchange. 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 a statement, BASF said it was "considering whether to solicit proxies" to vote for its nominees for the Engelhard board.

BASF shares rose 0.7 percent to close at 69.05 euros ($85.59) in Frankfurt.

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.

Source: Associated Press/AP Online

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