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BASF raises offer on Engelhard

By Simon Pitman , 29-May-2006

Having increased its offer to buy out leading personal care supplier Engelhard, Germany-based BASF is looking more and more likely to be successful in its hostile takeover bid.

BASF has upped its bid for the US company from $37 a share to $39, representing an approximately 5 per cent increase on its original offer made in January.

Shareholders had been given until mid-April to consider the first offer, but following lobbying from Engelhard advising its shareholders not to accept the offer, BASF decided to increase the offer, which was announced May 22.

 

Further to the offer BASF says that, having raised the bar to the maximum, this will be its final offer.

 

Experts believe that BASF is now in a strong position. Engelhard's plan to buy back back a fifth of its equity at $45 a share look all but dashed and the share price has now dropped below BASF enhanced offer, currently trading on the NYSE at $38.68.

 

Upon news of the increased bid Engelhard's die-hard retaliatory stance seemed to have softened somewhat. In a press statement the company advised its share holders 'to take no action at this time.'

 

BASF has threatened to walk away from its proposed deal if it encounters further hostilities from Engelhard, a move that could now put the company in a tricky situation as there seems to be no other investors poised to bail Engelhard from a difficult financial situation.

 

Currently the chemicals sector is struggling against rising costs bought about by increased oil prices. Although BASF has been hit by the price hikes it is a much larger and more diverse company, with the resources to make further investments.

 

Engelhard has been harder hit by these global market pressures, forcing it to make price increases of between 5 and 7 per cent on a number of its leading fine chemical and material lines, which have in turn impacted its bottom line considerably.

 

In response Engelhard has announced a re-organisation of its personal care materials business, which will see it split up into three regional offices - Europe/ Middle-EastAfrica/South-America region, which will be head-quartered in Paris, an Asia-Pacific region based in Tokyo and a North America office based in New York.

 

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