Engelhard Corp. - Schedule 14A
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
SCHEDULE
14A
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Material Pursuant to § 240.14a-12
ENGELHARD
CORPORATION
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(Name
of Registrant as Specified In Its Charter)
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On
May
15, 2006, the Company issued the following press release.
Contacts
Media
Ted
Lowen, Engelhard Corp.
732-205-6360
Investor
Relations
Gavin
A.
Bell, Engelhard Corp.
732-205-6313
Ref.
#C1451
or
Dan
Katcher / Eden Abrahams
Joele
Frank, Wilkinson Brimmer
Katcher
212-355-4449
Engelhard
Corporation
101
Wood
Avenue, P.O. Box 770
For
immediate
release Iselin,
NJ 08830
ENGELHARD
SENDS LETTER TO SHAREHOLDERS
ISELIN,
NJ, May 15,
2006
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Engelhard Corporation (NYSE:EC), one of the largest surface and materials
science companies in the world, today sent the following letter to
shareholders:
May
12,
2006
VOTE
FOR GREATER VALUE - VOTE THE BLUE CARD
FOR
DIRECTORS COMMITTED TO MAXIMIZING SHAREHOLDER VALUE
Dear
Fellow Shareholder:
At
the
Annual Meeting to be held on June 2, 2006, you will have the opportunity to
elect Directors who will determine the future of Engelhard.
As
a
shareholder of this company, you are being asked to cast your vote for one
of
two slates of candidates: Directors supported by Engelhard who are committed
to
a recapitalization plan that
your
Board of Directors unanimously believes will deliver greater value than BASF’s
$38 per share offer by providing you with partial liquidity at an attractive
price of $45 per share while preserving your ability to participate in the
company’s exciting future growth potential - or a slate hand picked by BASF
which, to quote BASF, “would have the power to terminate . . . the
[r]ecapitalization” and “to take steps to facilitate [the BASF] offer” that your
Board of Directors has unanimously rejected as inadequate and
opportunistic.
By
the
design of the Engelhard Board of Directors, the decision rests in your hands.
We
hope you will carefully consider the information in this letter and in our
proxy
statement in reaching your conclusion and vote the BLUE proxy for the Engelhard
Directors at the upcoming Annual Meeting.
WE
BELIEVE BASF’S INADEQUATE OFFER FALLS SHORT
OF
THE VALUE OUR PLAN WILL DELIVER FOR SHAREHOLDERS
On
April
26, 2006, we announced that our Board of Directors had unanimously approved
a
recapitalization plan consisting of a self-tender offer for up to 26 million
shares for $45 per share in cash, continued execution of the company’s strategic
business plan and incremental cost savings we believe will deliver $15 million
annually beginning in 2007.
Your
Board of Directors and management believe that this recapitalization plan
represents the best value-creation alternative available to you for the
following reasons:
· |
Superior
Value to BASF’s $38 Per Share Offer
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We believe that our $45 per share self-tender offer; the company’s
continued ability to capitalize on our attractive growth opportunities
and
business strategy; and the $15 million in expected incremental annual
cost
savings will deliver greater value than BASF’s inadequate $38 per share
offer.
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· |
Accretion
to Earnings and Earnings Growth
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The purchase of shares pursuant to the $45 per share self-tender
offer
represents an attractive investment for the company. The recapitalization
plan is expected to be accretive to earnings per share (EPS) by
approximately six cents in 2007 and accretive to EPS
growth.
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· |
Expected
Strong Price-to-Earnings Multiple
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BASF launched its hostile offer when Engelhard’s stock was trading at a
forward price-to-earnings (P/E) multiple that was meaningfully lower
than
the historical relationship that prevailed for several years to the
forward P/E multiples of our key industry peers, Johnson Matthey
and
Umicore. The forward P/E multiple of Engelhard immediately prior
to the
unsolicited offer from BASF was 29.1% below that of Johnson Matthey.
This
compares to an average discount to Johnson Matthey of 6.9% for the
2003-2005 period. Immediately prior to the unsolicited offer from
BASF,
Engelhard’s forward P/E was 11.3% below that of Umicore, which compares to
an average premium of 19.3% for the 2003-2005 period. In addition,
since
the time of BASF’s hostile offer, forward P/E multiples for Engelhard’s
industry peers overall have generally increased. While this increase
could
be related to other factors, such as increased acquisition speculation
in
the industry in general following BASF’s offer for the company, we believe
that to be unlikely given the number and diversity of the companies
in our
peer group. We believe that our forward P/E multiple should reflect
a
relationship to key industry peers more in line with historical levels
and
should benefit from (a) the strength of Engelhard’s earnings performance
in recent quarters, (b) the expected robust and sustained earnings
growth
for the years ahead, and (c) the general rise in industry multiples
since
BASF commenced its hostile
offer.
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· |
Meaningful
Liquidity at an Attractive Price of $45 Per Share
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The recapitalization plan provides Engelhard shareholders with a
substantial liquidity opportunity for some of your shares at the
attractive price of $45 per share, while preserving your ability
to
realize the company’s outstanding future growth potential through
appreciation in the market price of the stock or a future sale of
the
company.
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· |
Continuing
Investment-Grade Credit Profile
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We do not believe that our financing of the $45 per share self-tender
offer will interfere with our ability to maintain the financial capability
needed to execute our strategic business plan and realize our growth
opportunities. Implementation of the recapitalization plan is expected
to
result in continuance of investment-grade credit ratings for the
company.
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THE
CHOICE IS YOURS -
ENGELHARD’S
VALUE-CREATION ALTERNATIVE OR BASF’S INADEQUATE
OFFER
Throughout
Engelhard’s history we have maintained that our shareholders - the true owners
of this great company - are entitled to decide the future of their investment.
Our Board of Directors’ decision to expand the board from six to nine members at
the upcoming Annual Meeting, thereby giving you the ability to elect a majority
of the newly enlarged board on June 2, is a testament to our commitment to
our
shareholders. We are entrusting you with the power to choose which path best
serves your interests - our recapitalization plan or BASF’s inadequate
offer.
By
electing Engelhard’s five highly-qualified nominees, which include the two
incumbent Class I Directors, Marion H. Antonini and Henry R. Slack, and three
individuals nominated to fill the newly created vacancies, Alain Lebec, Howard
L. Minigh and Michael A. Sperduto, you will ensure that Engelhard continues
down
the superior value-creation path envisioned in our recapitalization plan.
Alternatively, you could choose to vote for BASF’s slate and hand control of
your company over to a group of nominees chosen by BASF,
the same company that is attempting to effect its inadequate $38 per share
offer
for the benefit of its own shareholders at the expense of Engelhard’s
shareholders.
As
you
may recall, BASF has said that it spent two years studying and evaluating
Engelhard. BASF chose to launch its hostile offer at a point in time when our
P/E multiple was at a historic low relative to that of our closest peers,
Johnson Matthey and Umicore.
Remember,
too, that BASF previously indicated that it did not factor synergies into its
original $37 per share offer. BASF maintains that it sees only “modest
synergies” resulting from an acquisition of Engelhard, despite the fact that its
U.S. headquarters in Florham Park, NJ is less than 30 miles away from our
headquarters in Iselin, NJ. Additionally, it appears that BASF has very
significant tax loss carry forwards - in excess of $2.5 billion primarily in
North America - most of which we believe could be used to shield income
generated by our company from U.S. taxation. This tax synergy would, in all
likelihood, allow BASF to avoid paying any significant cash taxes that Engelhard
would otherwise be paying on its U.S. operating income (which accounts for
approximately 60% of Engelhard’s total operating income) for many years to
come.
Despite
having performed extensive due diligence in March and April of this year, BASF
recently claimed that it can’t yet quantify the likely synergies. We believe
that the synergies BASF would realize by acquiring our company are significant,
and that BASF’s $38 per share offer does not compensate Engelhard shareholders
for those synergies.
It’s
worthwhile noting as well that the Euro has strengthened significantly against
the U.S. dollar since BASF launched its hostile takeover campaign against
Engelhard in early January. This means that the same $38 per share that BASF
could have offered in early January is equivalent in Euro terms to more than
$40
per share today.
The
value
inherent in this company belongs to you - the owners of Engelhard. Don’t let
BASF get away with its attempt to buy Engelhard at an opportunistic price that
doesn’t reflect the company’s current value and future value-creation potential.
YOUR
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU
REJECT
BASF’S OFFER AND NOT TENDER YOUR SHARES TO BASF
The
Engelhard Board of Directors unanimously determined that BASF’s $38 per share
offer is opportunistic and undervalues Engelhard. In
making
its offer, BASF ignored Engelhard’s strong fourth quarter 2005 and first quarter
2006 earnings, which were both well above Wall Street research analyst
expectations, and the clear evidence that our business strategy is just
beginning to pay off. We have made significant investments in recent years
in
both organic growth initiatives and strategic acquisitions. Our business plan,
which was developed long before BASF made its intentions regarding Engelhard
known, reflects that these actions have positioned us to generate strong
earnings growth over the next several years.
As
we
continue to execute on our business strategy, the recapitalization plan gives
shareholders partial liquidity at an attractive price of $45 per share while
preserving your ability to participate in the company’s exciting future growth
potential. Your Board of Directors has clearly demonstrated its commitment
to
you by rejecting BASF’s offer, which undervalues Engelhard.
PROTECT
THE VALUE OF YOUR INVESTMENT
AND
THE FUTURE OF YOUR COMPANY
Our
long-term history of delivering value for our shareholders is strong. Over
the
five-year period through December 31, 2005, the total annualized return on
Engelhard’s stock was 9.85%, exceeding both the S&P 500 Index at 0.5% and
the S&P Chemicals Index at 8.4%.
Your
Board of Directors remains focused on doing the right thing for our
shareholders. Engelhard’s Board of Directors has consistently acted in your best
interests, appropriately and diligently reviewing BASF’s initial and latest
inadequate offers and undergoing a process aimed at ensuring fair value for
your
shares.
It
is important to keep in mind that this is a fight for you, our shareholders,
to
receive fair value for your shares, not a fight for
independence.
Engelhard’s Board of Directors urges you to vote the BLUE card FOR Engelhard’s
board nominees, thereby sending BASF the message that you will not sell the
company at an inadequate price.
We
appreciate your continued support.
On
behalf
of the Board of Directors
Sincerely,
/s/
Barry
W. Perry
Barry
W.
Perry
Chairman
and Chief Executive Officer
Forward-Looking
Statements.
This letter contains forward-looking statements. These statements relate to
analyses and other information that are based on forecasts of future results
and
estimates of amounts not yet determinable. These statements also relate to
future prospects, developments and business strategies. These forward-looking
statements are identified by their use of terms and phrases such as
“anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,”
“predict,” “project,” “will” and similar terms and phrases, including references
to assumptions. These forward-looking statements involve risks and
uncertainties, internal and external, that may cause Engelhard’s actual future
activities and results of operations to be materially different from those
suggested or described in this announcement. For a more thorough
discussion of these factors, please refer to “Forward-Looking Statements” on
page 6 of the definitive proxy statement, dated May 12, 2006, “Forward-Looking
Statements” (excluding the first sentence thereof), “Risk Factors” and “Key
Assumptions” on pages 34, 35 and 38, respectively, of Engelhard’s 2005 Annual
Report on Form 10-K, dated March 3, 2006. Please also refer to
“Forward-Looking Statements” and “Key Assumptions” contained in the investor
presentation captioned “Recapitalization Plan” filed as an exhibit on Form 8-K,
dated April 26, 2006, and “Forward-Looking Statements” in the Offer to Purchase
filed as an exhibit to Schedule TO, dated May 5, 2006, for additional
information regarding such risks, uncertainties and contingencies.
Investors
are cautioned not to place undue reliance on any forward-looking statement,
which speaks only as of the date made, and to recognize that forward-looking
statements are predictions of future results, which may not occur as
anticipated. Actual results could differ materially from those anticipated
in
the forward-looking statements and from historical results due to the risks
and
uncertainties described above, as well as others that Engelhard may consider
immaterial or do not anticipate at this time. The foregoing risks and
uncertainties are not exclusive and further information concerning Engelhard
and
its businesses, including factors that potentially could materially affect
its
financial results or condition, may emerge from time to time. Investors are
advised to consult any further disclosures Engelhard makes on related subjects
in Engelhard’s future periodic and current reports and other documents that
Engelhard files with or furnishes to the Securities and Exchange Commission
(“SEC”).
No
Offer or Solicitation.
This letter does not constitute an offer or invitation to purchase nor a
solicitation of an offer to sell any securities of Engelhard. The
self-tender offer by Engelhard previously announced on April 26, 2006 commenced
on May 5, 2006. Any offers to purchase or solicitation of offers to sell will
be
made only pursuant to a tender offer statement (including an offer to purchase,
a letter of transmittal and other offer documents) filed by Engelhard
(“Engelhard’s Tender Offer Statement”) on Schedule TO with the SEC on May 5,
2006. Engelhard’s shareholders are advised to read Engelhard’s Tender
Offer Statement and any other documents relating to the tender offer that are
filed with the SEC carefully and in their entirety because they will contain
important information.
Additional
Information. Engelhard’s shareholders are advised to read Engelhard’s definitive
proxy statement dated May 12, 2006 carefully and in its entirety because it
contains important information. Copies of the definitive proxy statement
may be obtained from MacKenzie Partners, Inc. at the address set forth
above.
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