Albemarle raised its cash offer of 130p to 160p, valuing Albright & Wilson at pounds 502m and trumping a 145p bid from Rhodia, the French company majority controlled by the chemicals giant Rhone-Poulenc.
Albright's board immediately recommended the bid from Albemarle, which has helped to double Albright's market value since it confirmed talks with interested parties in January.
The City was yesterday expecting the battle to go into another round. Traders marked Albright's shares up 18p to 163p, above the Albemarle bid level.
Rhodia encouraged those suspicions with a statement saying Albright, the world's biggest supplier of phosphates for detergents, remained a strategic interest for the group.
"We will consider our options and make our position public in the coming days, within a fortnight from now," said a company spokesman.
Analysts believe Rhodia has the capacity to retaliate with a bid of up to 200p.
But most expect an offer at around 170p. Phillips & Drew, the fund manager with a 25 per cent stake in Albright, is pledged to support any further bid from Rhodia above 160p.
Martin Evans, chemicals analyst at the stockbroker Sutherlands, said: "I think the next step will be for Rhodia to come back in an attempt at a knock-out bid. Rhodia is much more committed to Albright's business."
The takeover battle took on a new twist earlier this week when Rhodia learned of advanced talks between Albright and Solutia, a US company specialising in phosphates. Some investors feared the news would scupper a bid from Rhodia, also big in phosphates, because of competition problems.
Rhodia has already said it does not want Solutia. But the group has avoided competition problems in the short term by using a small Austrian takeover vehicle for the bid, ISPG.Reuse content