BASF Pursues Acquisition of Rival Evonik to Consolidate Struggling European Chemical Sector

Deep News
09/25

BASF has made an acquisition approach to its industry rival Evonik, aiming to consolidate the pressured European chemicals sector, according to people familiar with the matter. The Ludwigshafen-based company recently submitted a merger proposal to Evonik and its largest shareholder, the RAG Foundation.

Should the deal materialize, the world's largest chemical company would broaden its geographic footprint and product portfolio, completing a consolidation of the currently struggling chemical industry. Essen-based Evonik has a market value of 8.4 billion euros, and the transaction would require a substantial acquisition premium; its enterprise value including net debt stands at approximately 12 billion euros. BASF, with a market value of 47 billion euros, has been in contact with multiple investment banks since earlier this year to evaluate the acquisition, and the potential deal is still being pursued.

People familiar with the matter cautioned that although the two sides have entered negotiations, an agreement may not ultimately be reached. Evonik's shareholders and management need to confirm that a merger with BASF offers strong strategic synergies while also being satisfied with the acquisition premium. The stance of the RAG Foundation, which holds a 44% stake in Evonik, will be key to the deal's success or failure.

The acquisition represents an important move by BASF CEO Markus Kamieth to consolidate the fragmented European chemical industry. The merger would create a German domestic champion better positioned to compete with Chinese companies such as Sinopec and U.S. rivals such as Dow. The two companies together generated 74 billion euros in revenue last year.

The merger would face regulatory scrutiny, but the EU is increasingly supportive of building larger, more competitive European domestic champions. The two parties have overlapping operations in Germany and elsewhere, offering potential cost reductions and opportunities to jointly expand in Asian and U.S. markets.

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