BASF reaches agreement to buy Degussa’s construction chemicals business
- Transaction value €2.7 billion for BASF
- Attractive forward integration for BASF
- 4 to 5 percent annual growth in global construction chemicals market
BASF Aktiengesellschaft, Ludwigshafen, reached an agreement with Degussa AG, Düsseldorf, to acquire Degussa’s construction chemicals business. The purchase price for equity is just under €2.2 billion. As a result, the transaction value for BASF is €2.7 billion. The transaction, which still requires approval from the relevant authorities, is expected to close by the middle of 2006.
“Degussa’s construction chemicals unit has an excellent position in the industry and offers BASF an attractive means of forward integration in its existing value chain in construction chemicals,” said Dr. Andreas Kreimeyer, member of the Board of Executive Directors of BASF Aktiengesellschaft, responsible for the Performance Products segment. “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.”
The global construction chemicals market is valued at around €13 billion and is attractive in view of annual growth of about 4 to 5 percent, relatively stable margins and high potential for innovation. The acquisition of Degussa’s business will give BASF rapid access to additional industrial customers and end-users. BASF’s strong presence in Asia will additionally generate interesting growth opportunities in this region’s booming construction sector.
By combining its own chemical expertise with Degussa’s know-how in construction chemicals applications, BASF will provide its customers with innovation at the highest level and help them to be more successful in the competitive construction sector. “We rely on the expertise of the employees at Degussa construction chemicals as well as our existing workforce, and are looking forward to forming the best team in the construction chemicals industry,” said Kreimeyer.
In fiscal 2004, Degussa’s construction chemicals division posted sales of approximately €1.8 billion and an EBIT of €201 million, with a global workforce of about 7,400 employees. As the market and technology leader as well as the largest supplier of construction chemical products, the division markets about 40,000 products worldwide and is organized in two segments – Admixture Systems and Construction Systems.
The business units in the Admixture Systems segment offer products and system solutions for the concrete industry. Customers include manufacturers of ready-mix and precast concrete and concrete products as well as contractors engaged in paving, mining and underground construction. The technologies used in Admixture Systems’ products ensure optimal concrete properties.
The business units in the Construction Systems segment are active in the areas of building systems, flooring applications, coatings and façades and expansion joints. Customers include building trade businesses, fabricators, building contractors and dealers specializing in concrete and masonry renovation, waterproofing, sealing, adhesive systems, tile fixing, performance flooring, coatings and façades, exterior insulation and expansion joints.
BASF supplies chemical precursors to the construction chemicals industry, in particular to formulators of construction chemical products. Functional polymers from BASF improve the flow properties of concrete, protect its surface, or are used in concrete repair systems. Other applications for functional polymers are adhesives for flooring and tiling, sealants, water vapor barriers and primers. Functional polymers are also used in phase-change materials (PCMs) for indoor temperature management. Other construction chemicals from BASF include wood coatings and polyurethane systems for installation purposes.
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