Chemicals maker BASF AG will buy Degussa AG’s construction chemicals business for about $2.6 billion US in a deal that will expand its reach in a fast-growing market segment.
BERLIN
Chemicals maker BASF AG will buy Degussa AG’s construction chemicals business for about $2.6 billion US in a deal that will expand its reach in a fast-growing market segment.
BASF said the construction chemicals market “is attractive in view of annual growth of about four to five per cent.” It added its own strong presence in Asia would generate opportunities in the region’s booming construction sector.
“The acquisition allows us to tap into the growth potential of the construction chemicals market on a sustainable basis and will further expand our position in this high-yield industry,” BASF board member Andreas Kreimeyer said in a statement.
The Degussa deal comes while BASF is attempting to buy the U.S. specialty chemicals company Engelhard Corp.
BASF launched a hostile 4.9-billion-euro ($5.8 billion US) takeover bid in January for Engelhard, which is based in Iselin, N.J. Engelhard’s board has termed the offer “inadequate” and advised shareholders not to tender their shares. BASF has said it is prepared to raise its offer but will not overspend to acquire Engelhard. It has not specified what price it would consider too high.
The Degussa unit that BASF would acquire has some 7,400 employees worldwide and had sales of about 1.8 billion euros in the 2004 fiscal year.
It has two segments: admixture systems, which manufactures products for the concrete industry; and construction systems, which supplies to specialists in facades, flooring, waterproofing and other areas.
Including debt being assumed in the deal, Duesseldorf-based Degussa said the total transaction value is more than 2.8 billion euros ($3.3 billion). BASF put the total transaction value including debt at 2.7 billion euros ($3.2 billion).
Juergen Reck, an analyst at Sal. Oppenheim, described the price BASF is paying for Degussa’s construction chemicals business as “adequate.”
The acquisition “helps the company to be more weatherproof when the chemicals cycle will start a downturn,” Reck told Dow Jones Newswires.
Degussa is owned by mining and energy company RAG AG, which recently bought a 43 per cent stake in Degussa from utility company E.On AG.
The Ludwigshafen-based company said the acquisition, which requires regulators’ approval, should be completed by the middle of 2006.
Associated Press
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