Dusseldorf. Investors and shareholder representatives expect BASF to make a new move to buy its competitor Evonik in the next few weeks. “I am convinced that BASF will now go through with this,” said Ulrich Hocker, President of the German Association for the Protection of Securities Holdings (DSW), to Handelsblatt. The background is the latest development in takeover poker.
The RAG Foundation, Evonik's main shareholder, did not speak out for or against BASF's offer at the weekend. She sees the decision first as a matter for the companies, i.e. in possible discussions between the board members.
BASF is now pushing for an exchange with Evonik management and is holding out the prospect of a higher offer and employment commitments, according to circles involved in the project.
Investors and analysts assume that there will be talks and that in the course of the process the purchase price could reach the mark of 25 euros per Evonik share. This was the result of surveys by Handelsblatt. BASF offered 22.15 euros per share in its first attempt. Evonik rejected the offer as too low.
BASF also wants to specifically address the employee side of the Essen-based company. According to the circles, management is countering the impression that possible cuts in a merger would only be at the expense of Evonik. They want to “bring together the best of both companies”. Cost synergies would also affect the BASF side. This applies not only to Germany, but to all locations worldwide.
“Social partnership and co-determination are lived practice on both sides, and it will stay that way,” say BASF circles. Existing contracts for securing employment and locations would be “fully adhered to” in the event of a merger.
According to insiders, BASF would also take a closer look at Evonik's plans to separate other parts of the company. Evonik plans to sell the basic chemicals division called Oxeno and the newly founded chemical park operator Syneqt. This is supposed to bring billions into the Essen coffers.
Evonik is looking for a new owner for the service business bundled in Syneqt with the operation of the chemical parks in Wesseling and Marl. Around 3,500 employees of the group are affected. In the event of a merger, BASF could continue to run Syneqt, says an insider. The group operates the Lausitz Industrial Park near Dresden through an infrastructure subsidiary.
BASF's first offer, presented in September, valued Evonik at around 10.3 billion euros. The company value including debt is 14 billion euros. In BASF circles it is said that the offer of 22.15 euros per share already contains a high premium based on the previous price development and is well calculated. The basis is an outside view of Evonik.
A higher offer is possible if “further potential for increasing value is developed together,” it was said in the circles. But this is only possible through discussions with Evonik management. There is currently no exchange between the two companies.
BASF not only has to promote an Evonik offer to Evonik and the union, but also to investors and analysts. Opinions there are mixed. “We see BASF’s move as fundamentally positive because there is great pressure to consolidate in the chemical industry,” says the representative of a German fund.
But there are also fears of risks for BASF's financial strength and because of the complexity of the deal, it said. Added to this is the European focus of both companies: they each generate 40 to 50 percent of their sales there.
Bloomberg credit analysts consider this to be problematic given high energy prices and continued weak demand in Europe. Investment bank JP Morgan believes that BASF could achieve higher returns with lower execution risks with other acquisitions.
BASF sees the merger as a “great opportunity for the German chemical industry to remain at the top of the global market,” says a manager. The industry is too fragmented and many individual players are too small for the new challenges of the global market, where they compete with strong companies from Asia and the Middle East.
This is not the only way BASF wants to continue to appeal to Evonik for a merger: both companies could benefit from joint purchasing of energy and raw materials, as well as from greater resources in research and development.
With the takeover move, BASF is following its strategy presented in September 2024. The first step envisages the separation of several businesses. The paint division has already been sold and the agricultural unit is scheduled to go public in 2027. The newly tailored core business is currently being trimmed for efficiency and around 20 percent of the costs will be eliminated. BASF boss Markus Kamieth wants to expand this core business through a takeover by 2028.
Evonik would strengthen the group's presence primarily in ingredients for cleaners, personal care, medicines and pet food as well as additives for industry. In corporate circles, it is emphasized that BASF is not dependent on a merger to further develop these businesses.
The people of Ludwigshafen want to proceed rationally when it comes to the possible purchase price. In BASF circles it is said that a takeover would not be at the expense of the company's financial goals. This applies to the promised debt reduction as well as to the planned distributions to shareholders. The project is financially structured in such a way that BASF's strong investment grade rating is not jeopardized.
DSW shareholder representative Hocker considers BASF's first offer to be too low. With an enterprise value of 14 billion euros, this corresponds to six to seven times Evonik's expected operating profit for 2027.
Analyst Sebastian Bray from Berenberg Bank suspects that BASF could be willing to pay between 24 and 25 euros per share. That would be eight times the expected profit. The purchase price would then reach 11.6 billion euros.
But that could also be too little for the Evonik management. The Essen-based company argues with the usual multiples for takeovers in the specialty chemicals sector. In the past, other takeovers have ranged between eleven and twelve times profits. So the ideas about the price are far apart.
