15 September 2008 18:00 [Source: ICIS news]
(Releads, adds detail and closing share price)
BASF's shares were down 1.57%, at €36.24, at the close of a day which saw European stocks plummet on the collapse of US investment bank Lehman Brothers.
The Xetra platform in Frankfurt was down 19.11% and the Dow Jones Global Chemicals Index was off 20.54%.
BASF offered Swfr6.1bn ($5.5bn/€3.9bn) to buy the Basel, Switzerland-based company, which recommended its shareholders accept the offer.
The offer represented Swfr50 a share, a 32% premium over the closing price of Ciba shares on Friday and a premium of 64.3% over the volume-weighted average price of Ciba shares over the last 60 trading days, BASF said.
According to media reports, there would certainly be job cuts in connection with the takeover. However, Ciba had already planned to cut around 1,200 jobs by the end of 2009 as part of its long-term restructuring programme.
Investment bank UBS, in ongoing calls with the companies, said BASF expected the deal to be earnings-accretive in the second year after the deal.
Given the relative small size of Ciba - BASF's 2008 earnings before interest, tax, depreciation and amortisation (EBITDA) was €11.2bn while Ciba’s was €470m – the impact on BASF at group level would be small, it said.
The bank added that there were some overlaps in paper chemicals, but argued that the main reason for acquisition is to expand BASF's specialty chemicals portfolio.
At 10:05 local time (8.05 GMT), Ciba’s shares surged to Swfr47.45, 25% up on Friday’s close.
Ciba’s share value has nearly halved since the third quarter of 2006 as the company struggled with low margins.
In August analysts cut ratings and earnings estimates for Ciba after the firm reported second-quarter operating profits 50% below consensus.
Ciba said integration into BASF would strengthen the businesses through access to BASF’s global research, production and marketing platform, raw materials and intermediates.
“BASF and Ciba have reached a transaction agreement in which the board of directors of Ciba supports BASF’s attractive offer and recommends its acceptance to Ciba’s shareholders,” Ciba said in a statement.
“Ciba strengthens BASF’s strategy and operations in the field of specialised chemical engineering through its leading innovation capabilities and application expertise in plastics additives, coating effects and water and paper treatment,” it added.
A spokeswoman at Ciba said the company would hold an extraordinary general meeting at the end of November to seek approval from its shareholders.
The transaction further requires the approval of the relevant merger control authorities.
($1 = Swfr1.11/€1 = Swfr1.60)
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