BASF Spurned

Engelhard's board announced that it has rejected BASF's $4.9 billion hostile takeover bid as inadequate and that it would seek another buyer. BASF shot back saying that its $37-per-share bid is "fair and compelling" and that Engelhard's rejection is not in the best interests of its shareholders.

"Our board unanimously determined that BASF's offer is opportunistic and undervalues Engelhard," said Chief Executive Officer Barry W. Perry. In a statement, the company said the board determined that BASF understates the value of synergies between the two companies and that the offer is below premiums that have been offered for comparable and smaller specialties businesses. The statement also refers to "third parties" that have expressed an interest in a deal with Engelhard.

Perry noted that the firm in recent years has divested older, low-margin businesses such as precious-metal fabrication and invested the proceeds into higher margin, high-growth businesses.

Perry forecasts growth in key Engelhard markets such as environmental control, which he estimated will jump from 5%-plus annual growth to "low-teens" growth in 2007 with the advent of new clean air regulations worldwide. He also noted positive growth forecasts in businesses serving energy, health, and cosmetics markets.

In 2005, Perry said, the company generated more than $100 million in operating earnings from businesses that are less than five years old.

BASF Chairman Jürgen Hambrecht responded that he is committed to purchasing Engelhard. "However, in its response to our tender offer, Engelhard did not provide any information that would prompt us to improve the terms of our current offer," Hambrecht said.