After refusing two earlier overtures from BASF, Engelhard's board of directors has agreed to BASF's "last, best, and final" offer of $39 per share in cash for all outstanding Engelhard shares. Including the assumption of Engelhard's debt, the deal is valued at $5.6 billion.
The two companies signed a definitive agreement on May 30. Engelhard now recommends that shareholders offer their shares to BASF. Engelhard's board has also withdrawn the company's counteroffer of $45 per share for 20% of its own shares.
"Our board has determined that the $39-per-share offer provides fair value to our shareholders," says Barry W. Perry, Engelhard's chairman and CEO. "The agreement paves the way for an orderly and cooperative transaction."
Engelhard's capitulation comes after a battle that started in January when BASF made an unsolicited $37-per-share bid for the catalyst and pigment maker. BASF raised the offer to $38 per share early in May and followed it with the $39 offer on May 22, which was accompanied by the declaration that the company would walk away if shareholders did not accept the deal.
BASF had also nominated its own slate of directors to run for election to Engelhard's board at the firm's June 2 annual meeting. Had they won, BASF's nominees would have constituted a majority of the nine-person board and would have had the power to accept BASF's proposal.
Just two weeks ago, that outcome looked increasingly likely. An influential proxy advisory firm, Institutional Shareholder Services (ISS), recommended that shareholders vote for BASF's nominees.
Analyst Dmitry Silversteyn of investment advisory firm Longbow Research says the ISS recommendation made it harder for Engelhard to fight BASF's bid for board control. And Engelhard's failure to find a white knight to rescue it with a higher bid finally made BASF's offer irresistible, he says.