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BASF and Engelhard Tie the Knot

Biz BriefsA six-month, $5.6 billion courtship finally paid off for BASF (NYSE: BF) last week when the German chemical giant announced it had acquired about 100 million shares, or 89% of the stock of Engelhard, a surface- and materials-science company based in Iselin. Under the deal BASF, whose U.S. headquarters are in Florham Park, is paying $39 a share. That works out to about a $5 billion valuation of Engelhard plus the assumption of the company’s debt.

The courtship had some rough patches. In January Engelhard played coy, rejecting BASF’s initial $37-a-share offer and later announcing a partial stock buyback offer for 26 million shares at $45 each. Engelhard also said it would increase the size of its board from six to nine members as a way to keep BASF from gaining control. In April BASF upped the ante, raising its bid to $38 apiece, but Engelhard still didn’t budge. BASF finally found the sweet spot at the end of May, when Engelhard said it would recommend the $39-a-share offer to shareholders. Analysts say the deal is good for BASF, and should help smooth out the cyclical nature of its businesses.

Meanwhile, BASF swallows a company with its own history. Engelhard played a big role in developing the first catalytic converters, which first appeared on cars in 1975. A year later, the company introduced the modern, “three-way” catalyst, which can eliminate up to 97% of hydrocarbons, 96% of carbon monoxide and 90% of nitrogen oxides produced by car engines. The company owes much of its growth to Charles W. Engelhard Jr., the son of the founder. The younger Engelhard, who died in 1971, was a friend of James Bond creator Ian Fleming, and reportedly was the inspiration for Fleming’s arch-villain Goldfinger.

Company Highlights

BASF

U.S. Headquarters: Florham Park

2005 Sales: $50.6 billion

2005 Net Income: $3.6 billion

Global Employees (2005): 80,945

N.J. Employees (2005): 1,500

Engelhard

Headquarters: Iselin

2005 Sales: $4.6 billion

2005 Net Income: $238.2 million

Global Employees (2005): 7,100

Source: Company filings

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