BASF to acquire speciality chemicals maker Cognis for €3.1 billion

BASF, the world's largest chemical company said today that it has reached an agreement to buy German speciality chemicals maker Cognis, owned by private equity firms Goldman Sachs Group and Permira Advisers, for €3.1 billion ($4.16 billion) including debt.

The deal, one of the biggest this year in the chemical sector, will be the second-biggest acquisition for the Ludwigshafen, Germany-based BASF, after it acquired Swiss rival Ciba for €3.8 billion in late 2008 (See: BASF plans to acquire Ciba Holding AG for approximately €3.8 billion).

The deal was finally wrapped up today by BASF following prolonged talks with Goldman Sachs and Permira since April, which mainly centred on price as the private equity firms were holding out in the hope to get at least €3.5 billion although they had bought Cognis for €2.5 billion in 2001. (See: BASF in talks to acquire Cognis in a potential €3 billion deal)

BASF will pay €700 million for buying Cognis, and including net financial debt and pension obligations, the total transaction will be worth €3.1 billion. The acquisition is subject to clearance by the competent merger control authorities and BASF expects the transaction to be closed by November 2010 at the latest.

The deal will add €2.6 billion in sales to BASF and reduce its dependence on plastics and chemicals made by Middle East competitors who produce them more cheaply.

Monheim, Germany-based Cognis is a leading global supplier of innovative specialty chemicals and nutritional ingredients, with a particular focus on the areas of wellness and sustainability.

A former Henkel AG unit, Cognis employs about 5,600 people, and operates production sites and service centers in 30 countries. Cognis delivers natural source raw materials and ingredients for the pharma, foods, beverages and dietary supplements markets, as well as for the cosmetics, detergents and cleaners industries.

In 2009, Cognis recorded sales of about €2.6 billion and an adjusted EBITDA (operating result) of €364 million and has net debt of €1.9 billion as of end 2009.

Post closing, Cognis will be integrated into BASF's Performance Products segment, which had sales of €9.4 billion in 2009.

''With the acquisition of Cognis, we are strengthening our portfolio with cyclically robust and profitable businesses and further expanding our position as the world's leading chemical company,'' said Dr. Jürgen Hambrecht, chairman of the board of executive directors of BASF.

''With this acquisition, we want to achieve a leading position in personal care ingredients, strengthen our leading position in value added products for home care and establish a strong position in health and nutrition products,'' said Dr. John Feldmann, member of the board of executive directors of BASF.

''By purchasing Cognis, we will in particular expand our portfolio with products based on renewable raw materials. A broader and more attractive offering of products and services combined with our research and development expertise will allow us to become an even more important partner for joint development projects with our customers, he added.

BASF is the world's leading chemical company, which has a portfolio ranging from chemicals, plastics and performance products to agricultural products, fine chemicals as well as oil and gas.

BASF posted sales of more than €50 billion in 2009 and had approximately 105,000 employees as of the end of 2009.