Jones Lang LaSalle


BASF may acquire unit from Degussa
Raises offer to $3.3B for the construction chemicals division
BY ANGELA CULLEN
BLOOMBERG NEWS

BASF entered exclusive talks to buy Degussa's construction chemicals unit as it seeks sources of revenue that are less cyclical than commodity chemicals.

BASF, the world's largest chemical maker, which has its North American headquarters in Florham Park, was chosen after a review of several bids, Dusseldorf, Germany-based Degussa said. Details of BASF's binding bid weren't released.

BASF raised its offer to 2.8 billion euros ($3.3 billion) to come closer to bids by financial investors, Handelsblatt reported Monday.

Buying the unit would give BASF, which is also bidding for Iselin-based catalysts maker Engelhard Corp., more customers for its functional chemicals and polyurethane operations.
Mining company RAG controls more than 90 percent of Degussa and may use proceeds from the sale to pay off the cost of the takeover once it completes an offer for the rest of the company's shares.

"These acquisitions have to be understood as strategic investments to cushion against the next downturn in the chemical cycle," said Lutz Grueten, an analyst at Kepler Equities. "If they get Engelhard and Degussa construction chemicals, they will be well leveraged against the downturn."

"The joint aim is to conclude the purchase agreement for the transaction shortly," BASF and Degussa said in separate statements. BASF spokesman Michael Grabicki declined to say when the companies aim to conclude their negotiations.

BASF raised its offer from 2.5 billion euros, Handelsblatt reported. The increased offer was as much as 200 million euros lower than other bids, the paper said. BASF said Jan. 27 that it submitted a binding offer for Degussa's unit, which supplies concrete mixes and materials used in floorings, coatings and facades.

BASF on Feb. 6 extended a $37 a share offer for Engelhard until March 3 and has said it's prepared to raise that by $1 if Engelhard provides information the company is worth more.
Engelhard chief executive Barry W. Perry rejected the $4.9 billion offer as too low.

Closely held RAG began buying shares of Degussa in 2003 as chief executive Werner Mueller moved to reduce the company's reliance on coal in preparation for selling stock to the public.
In December, Essen, Germany-based RAG exercised its right to buy the 43 percent of Degussa owned by E.ON for 2.8 billion euros nd is offering 42 euros a share to buy the remaining stock.
Several offers, some unsolicited, were made for the unit since Degussa chief executive Utz-Hellmuth Felcht said in December that the division was for sale, the company said Feb. 7.

Permira and Blackstone Capital Partners have withdrawn from the bidding, leaving Bain Capital, Cinven, BC Partners, Kohlberg Kravis Roberts & Co., CVC Capital Partners and France's PAI, Handelsblatt said.

Degussa, the world's biggest specialty chemicals maker, hired Goldman, Sachs Group to manage the sale of the unit, which had 1.8 billion euros in revenue in 2004. The division employs about 7,700 people, with many of the workers based in Trostberg in southern Germany.