ALB: hearing BASF intends to offer 4.8bln for Albemarle (ALB). Expects an announcement 'shortly'. Indicates the offer is friendly.

I'm hearing some chatter saying BASF A.G., one of the largest chemical companies in the world is close to making a $4.9 billion offer for Albemarle (NYSE:ALB).

Since I've been following ALB for quite some time, I thought to give some quick colour on the topic. While one has to treat all market rumors with a fair dose of skepticism, there may be some truth to this one. Why?

- First of all, ALB does have a very good petroleum refining catalyst business, which they bought from Akzo Nobel back in 2004. One of the main products is a hydroprocessing catalyst that removes sulfur from heavy crude oil, turning it into more expensive light sweet crude. The deal proved to be a brilliant one as demand for refining catalysts surged. Customer list includes Exxon, RDS, Chevron as well as many independent refiners like VLO & TSO. Today the business accounts for about 40% of total revenue (and 50%+ of profits).

This is definitely something BASF would want to have complementing their existing refinery catalysts business.

- Secondly, BASF has a history of making acquisitions in the space. They bought Englehard, another big player in the refining catalysts business in 2005/2006. If my memory serves me correct, the deal was a hostile one.

- Third, BASF sure has the firepower to do the deal. The co has around EUR10 billion available for deals and the management is on record saying they have identified catalysts as an area of potential interest.

So there you have it,

Hope it helps.

NC