03 January 2006 20:14 [Source: ICIS news]
TORONTO (ICIS news)--BASF's hostile bid for US catalyst maker Engelhard is "great news" for Engelhard shareholders, Citigroup said on Tuesday.?xml:namespace>
The bid underscores the value of Engelhard's catalysts franchise, Citigroup said in a research note for clients. With Engelhard under its belt, BASF would become the world's largest catalyst maker, the analysts added.
Engelhard's prospects are based on catalyst opportunities in diesel markets in the US and Europe. In addition, Asia remains a huge market, with Engelhard well positioned in the region through joint ventures (jv) in Japan, Korea, India and a plant in China, Citigroup said.
Risks to Engelhard's business include a slowdown in refinery and chemicals market, which would translate into lower sales for its refining and chemicals catalysts. Asian competitors who compete on price to take market share also pose a risk. Said Citigroup: "Engelhard's markets are very price sensitive, if one company undercuts pricing in the industry, the markets tend to take time to recover."
Commenting on Engelhard's automotive catalysts operations, Citigroup said that division would be affected if North American car makers Ford and General Motors (GM) continue to lose market share. However, Engelhard's position with Honda, Nissan and others would offset these losses. The analysts added: "The real threat to Engelhard would come from share gains at Chrysler, and Toyota, neither of which is a substantial customer of Engelhard."
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