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Updated from 7:12 a.m. EDT



has turned to Wall Street's financial engineers in its efforts to fend off an overseas takeover.

The New Jersey chemical concern disclosed a semiexotic share repurchase Wednesday designed to discourage


( BF) from pursuing the hostile offer first announced in January. Engelhard, whose shares have been sitting at all-time highs for the duration of the takeover drama, said the action will preserve both its independence and financial health.

The centerpiece is a leveraged stock repurchase in which Engelhard plans to buy back 20% of its shares for $45 apiece, a price that is 17% above the current quote. The tactic, which will be financed through borrowed money, is similar to one

recently deployed by

Affiliated Computer

( ACS) in its efforts to ward off private equity suitors.

Other companies that have recently taken loans to do above-market share repurchases include







Specifically, Engelhard is offering to repurchase 26 million of its 123 million outstanding shares at $45 each in cash. The price is well above BASF's last buyout offer of $38 a share and Engelhard's Tuesday close of $38.30. Despite the big premium, Engelhard said the repurchase will boost 2007 earnings by 6 cents, a result of the diminished share count and the additional debt in the company's capital structure.

"Approval of the recapitalization plan completes a value-maximization process Engelhard's board authorized in January after determining BASF's unsolicited offer of $37 per share was inadequate and not in the best interests of Engelhard shareholders because it does not adequately recognize the company's current performance or future prospects," the company said. "The board made the same determination with respect to BASF's $38 per share proposal."

In recent premarket trading, Engelhard's stock added 40 cents to $38.70.

The company said it has financing commitments from its financial adviser, Merrill Lynch, as well as JPMorgan, to fund the buyback. It said permanent financing is expected in the form of floating and fixed-rate debt, plus another recent Wall Street craze -- so-called "hybrid" debt, which combines attributes of both stocks and bonds.

"The company's financing of the $45 per share self-tender offer should not interfere with its ability to maintain the financial capability needed to execute its strategic business plan and realize its growth opportunities," Engelhard said. "Implementation of the recapitalization plan is expected to result in the continuance of investment-grade credit ratings for the company."

In justifying its proposal, Engelhard noted that its share valuation had lagged behind its peers before BASF's offer shook the stock up.

"In addition, since the time of BASF's hostile offer, forward P/E multiples for Engelhard's industry peers overall have generally increased. Engelhard believes that its 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," it said.