BASF holds fire on increased Engelhard offer

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BASF, the German chemicals company, will not for the moment raise its bid for Engelhard after the US catalyst maker on Monday rejected its $4.9bn offer, citing talks with potentially higher-paying competitors.

After a meeting of senior executives, BASF on Tuesday said the decision by Engelhard’s board deprived its shareholders of “a significant and timely return”, but that it will stick to its “fair and compelling” all-cash offer of $37 a share.

People close to the company said BASF would consider a next move only if the white knight hinted at by Engelhard made an offer. Any “killer bid” to banish the danger of a bidding war would then have to hit $40 to $42 a share.

In the biggest hostile take-over attempt ever by a German company, the world’s largest chemicals producer seems happy to wait in the hope of calling Engelhard’s bluff over its claim of an impending bidding war.

Having fought to regain competitiveness, many German companies are again looking to buy – though not at any price. ThyssenKrupp, the steelmaker, on Monday pulled out of a bidding war for Canadian rival Dofasco.

BASF offered Engelhard shareholders $37 a share for the New Jersey company on January 3, ending efforts by Jürgen Hambrecht, chief executive, to agree a friendly takeover.

Engelhard late on Monday advised shareholders to reject the offer, saying that it undervalued its catalysts and pigments businesses.

Barry Perry, chief executive, said he had talked with strategic and financial players about counter-bids.

Engelhard shareholders have until February 6 to respond to BASF’s all-cash offer. The Ludwigshafen-based company repeated its offer to pay $38 a share if Engelhard agrees to open its books as a prelude to an agreed deal.

BASF wants to expand its broad portfolio by turning its small catalysts business into a world leader. With China and the US tightening emissions controls, it projects strong growth for sales of catalysts for cars, trucks and factories.

Mr Hambrecht said last month he was unwilling to ruin his reputation for never overpaying to secure the deal.

Analysts consider his offer fairly priced. But many see a higher bid as the only way out of the current impasse.

This prospect weighed on BASF’s shares all day, with Engelhard’s rejection keeping prices under Monday’s close of €62.12 for most of the session. Its shares closed at €61.95 before BASF came out with its statement.

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