Engelhard Agrees To Be Acquired By BASF

After refusing two earlier takeover 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 signed a definitive agreement early on Tuesday. 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 Engelhard’s board has also withdrawn the company’s counteroffer of $45 per share for 20% of its own shares.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 by 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. Were they to win, 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 last week, that outcome looked increasingly likely. An influential proxy advisory firm, Institutional Shareholder Services, recommended that Engelhard shareholders vote for BASF’s nominees. Now, because of the agreement between the two chemical firms, Engelhard has postponed its annual meeting to June 30 in order to mop up final administrative details before the takeover.

BASF’s hostile bid for Engelhard was unusual for a firm better known for friendly takeovers. Jürgen Hambrecht, chairman of BASF, says, “We are very pleased that BASF and Engelhard were able to reach agreement on a negotiated transaction.”

In fact, BASF has recently negotiated a string of friendly takeovers intended, like the Engelhard deal, to diversify the firm’s holdings and provide a home for its profits. Earlier this month, BASF agreed to buy the coatings polymers subsidiary of JohnsonDiversey for $470 million. In March, BASF agreed to buy Degussa’s construction chemicals business for more than $3 billion. European regulators approved that deal on May 24.