BASF SE (ADR) (OTCMKTS:BASFY) appears to be considering a counteroffer for E I Du Pont De Nemours And Co (NYSE:DD). DuPont and Dow Chemical Co (NYSE:DOW) earlier agreed to on a cash and stock merger deal worth about $130 billion. Following the news, shares of BASF were trading down on the German stock exchange as the firm was said to be talking to its bankers and advisers to understand the pluses and minuses of the merger.
Skepticism In The Market
Investors appear unenthusiastic about BASF SE (ADR) (OTCMKTS:BASFY) making a renewed bid on DuPont. There is a concern that such a bid might get dragged out for a long time and posed an expensive takeover battle. Analysts expressed their skepticism of it, specifically from Bernstein, where they noted that they did not see the deal going through.
BASF preferred not to react to the media reports. However, one Bernstein analyst said that BASF could not counter with an attractive offer to nullify the current Dow-DuPont deal. The analysts believe that the German firm would find it tough to raise the estimated amount of $72 billion for DuPont.
Overstretched Balance Sheet
Another analyst from Equinet, Michael Schaefer, said that BASF SE (ADR) (OTCMKTS:BASFY)’s entering the fray meant that it would be overstretching its balance sheet. The interesting part of the latest move was that it came on the heels of its CEO, Kurt Bock, dismissing suggestions that the company needed to be involved in big deals so that it could transform itself as a diversified chemicals and oil business.
During the five-year tenure of Bock, BASF has avoided big takeover deals at its plastics and core chemicals units. Instead, the two segments witnessed divestments and cutbacks. These moves were contrary to his predecessor, Juergen Hambrecht’s strategy. Given these changes in direction, there are doubts whether the German firm would bid for the American firm at a premium.