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March 1, 2012
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2.3 – Acquisitions and divestitures

Acquisitions

In 2011, BASF acquired the following activities:

  • The acquisition of inge watertechnologies AG and inge GmbH, Greifenberg, Germany, a specialist for ultrafiltration technology, which had been announced in April 2011, was successfully completed on August 16, 2011. This acquisition gives BASF access to the technology and market for ultrafiltration, a method of treating drinking water, process water, wastewater and seawater using special Multibore® membranes.
  • In October BASF founded BASF Hock Mining Chemical (China) Company Limited (BASF Hock) together with Ji’Ning Hock Mining & Engineering Equipment Company Limited (Hock). BASF holds a majority share of 75% in BASF Hock. In December 2011, the company acquired Hock’s business activities in the area of chemical injection and cavity filling products for coal mining and other underground applications.
  • Additionally, on November 25, 2011, BASF completed its acquisition of 50% of Zandvliet Power N.V., which had been announced in June. Zandvliet Power N.V. is a jointly controlled entity with the Belgian company Electrabel and runs the gas and steam turbine power plant at the BASF site in Antwerp, Belgium.

BASF acquired the following businesses in 2010:

  • On December 9, 2010, BASF acquired Cognis Holding GmbH (Cognis), Monheim, Germany, a specialty chemicals company that produces products based on renewable raw materials for the health and nutrition market as well as the cosmetics, detergents and cleaner industries. The equity purchase price of the shares in Cognis held on the acquisition date amounted to €700 million, plus €4 million in interest. The approval for the acquisition of Cognis from the antitrust authorities contained conditions pertaining to the divestiture of certain businesses and plants located at Cognis’ site in Hythe, England (the Cognis hydroxy methacrylates business, the Cognis multifunctional methacrylates [MFM] and adducts business, and plants for the production of polyalkylene glycols [PAG] and PAG-based lubricants.) The remaining business activities of Cognis were completely integrated into the BASF Group, primarily in the Performance Products segment. The preliminary purchase price allocation from 2010 was slightly adjusted in the current reporting year. As a result, goodwill increased by €10 million to €599 million.
  • In addition, on December 30, 2010, BASF acquired the styrene catalysts business of CRI/Criterion, a company based in Iselin, New Jersey.

The following shows an overview of the preliminary purchase price allocations of the acquisitions conducted in 2011 and 2010.

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Effects of acquisitions in the year of acquisition

 

 

 

2011

 

2010

 

Million €

%

 

Million €

%

Long-term assets

213

0.6

 

2,830

8.2

Goodwill

50

0.8

 

589

10.0

Other intangible assets

91

1.5

 

1,317

20.7

Property, plant and equipment

66

0.4

 

833

4.8

Financial assets

 

19

0.6

Other assets

6

0.4

 

72

4.1

Short-term assets

23

0.1

 

1,189

4.8

Thereof cash and cash equivalents

1

0.1

 

116

7.8

Total assets

236

0.4

 

4,019

6.8

 

 

 

 

 

 

Equity

10

.

 

3

.

Long-term liabilities

56

0.3

 

843

4.0

Thereof financial indebtedness

 

1

.

Short-term liabilities

21

0.1

 

2,452

15.7

Thereof financial indebtedness

 

1,920

57.0

Total equity and liabilities

87

0.1

 

3,298

5.6

Payments for acquisitions

149

 

 

721

 

Divestitures

In 2011, BASF divested the following activities:

  • On April 1, 2011, N.E. Chemcat Corporation, Tokyo, Japan, an entity jointly controlled with Sumitomo Metal Mining, sold the business with chemicals for surface treatment and electroplating to Metalor, an international group based in Switzerland. The divested business activities include solutions for precious metals as well as apparatus engineering for electroplating applications, which are primarily sold to customers in the electrical industry.
  • On April 8, 2011, BASF divested its surface technologies business for thermal spray coatings, which had been acquired as part of the Engelhard acquisition in 2006. The business was sold to North American firm Metal Improvement Company LLC, a subsidiary of Curtiss Wright Corporation, based in New Jersey.
  • The bisomer-monomer business and the conventional contact lens business of Cognis were sold to GEO Specialty Chemicals Inc. on August 31, 2011, thereby fulfilling the conditions of the acquisition as set out by the European Commission. The transaction included production facilities in Hythe, England.
  • On October 1, 2011, BASF transferred its styrenics disposal group activities to the joint venture Styrolution.
    For more information on the divestiture of the styrenics business, see below.

In 2010, BASF divested the following activities:

  • The iron oxides business, marketed under the name Sicovits, was sold to Rockwood Italia S.p.A. on December 1, 2010.
  • On November 22, 2010, BASF completed the disposal of the dyes and markers business to John Hogg Technical Solutions Ltd. This business included the Sudan®, Pigmoil, Somalia, Covertrace® and KeroDye® brands.
  • In 2010, the business with synthetic dry strength agents used in the paper industry was divested in accordance with the European Commission’s conditions for the acquisition of Ciba. In addition, the business with starch production and modification plants was sold to Chemigate Oy. Furthermore, BASF was able to sell major parts of the Ciba Expert Services business to Intertek Group plc, and the businesses with the pigments bismuthvanadate and indanthrone blue to Dominion Colour Corporation, in order to comply with conditions imposed by antitrust authorities.
  • On September 28, 2010, the sale of the PIRA business to the Smithers Group was completed.
  • On June 7, 2010, BASF concluded the divestiture of its business with hydrophilic melt additives for plastics, marketed under the brand name Irgasurf HL, to Techmer PM, based in Tennessee.

The following overview shows the effects of the divestitures in 2011 and 2010 on the consolidated balance sheet (including the divestiture of the styrenics business). Sales represents the decline in sales due to the divestitures compared with the previous year. The impact on equity relates mainly to gains and losses from divestitures. Any expenditures for restructuring measures connected with divestitures are not included.

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Effects of divestitures in the year of divestiture

 

 

 

2011

 

2010

 

Million €

%

 

Million €

%

Sales

(361)

(0.5)

 

(58)

.

 

 

 

 

 

 

Long-term assets

728

2.1

 

(10)

.

Thereof property, plant and equipment

(13)

(0.1)

 

(9)

(0.1)

Short-term assets

(735)

(2.7)

 

(19)

(0.1)

Thereof cash and cash equivalents

(2)

(0.1)

 

Total assets

(7)

.

 

(29)

.

 

 

 

 

 

 

Equity

586

2.3

 

19

.

Long-term liabilities

148

0.8

 

Thereof financial indebtedness

.

 

Short-term liabilities

(74)

(0.4)

 

(5)

.

Thereof financial indebtedness

.

 

Total equity and liabilities

660

1.1

 

14

.

Proceeds from divestitures

667

 

 

43

.

Divestiture of styrenics activities

On October 1, 2011, BASF and INEOS transferred their worldwide business activities in the styrene monomer (SM), polystyrene (PS), acrylonitrile butadiene styrene (ABS), styrene-butadiene block copolymer (SBC), copolymer blends and other styrene-based copolymer (SAN, AMSAN, ASA, MABS) business activities into the newly-founded joint venture Styrolution. The 50% share held by BASF is consolidated using the equity method. BASF does not intend to hold this share permanently. To determine the disposal gain, Styrolution was measured at fair value on the basis of discounted cash flows as of October 1, 2011. At this time, the styrenics disposal group was deconsolidated as a disposed net asset. The following table shows the disposed assets and liabilities for the styrenics disposal group as of September 30, 2011:

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Styrenics disposal group on the date of disposal (million €)

 

Sept. 30,  2011

Intangible assets

42

Property, plant and equipment

216

Inventories

297

Accounts receivable, trade

380

Other receivables and other assets

52

Cash and cash equivalents

49

Assets of the disposal group

1,036

Provisions for pensions and similar obligations

4

Other provisions

62

Accounts payable, trade

123

Other liabilities

106

Liabilities of the disposal group

295

Net assets

741

With the founding of Styrolution, BASF received a cash consideration in the amount of €600 million as compensation for the value difference between the businesses contributed by both joint venture partners. Other expenses and income from the divestiture include options (measured at fair value) in connection with the planned medium-term withdrawal of BASF from the joint venture and deconsolidation effects; previously eliminated receivables and payables between BASF Group companies and Styrolution have been reinstated. The reported disposal gains of €593 million were determined in accordance with the regulations set out by the Standing Interpretations Committee Interpretation (SIC-13). This amount equals the cash consideration less the mutual compensation claims. The initial at-equity book value of the participation in Styrolution, adjusted according to SIC-13, was €734 million.

The following overview shows the individual components of the profit BASF realized as a result of the disposal of its styrenics business:

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Profit realization from the deconsolidation of styrenics activities
(million €)

 

 

Fair value of the 50% share in Styrolution

1,285

Disposed net assets of the disposal group

(741)

Cash consideration

600

Net payment from mutual compensation claims

(7)

Miscellaneous income and expenses

7

Adjustment according to SIC-13

(551)

Disposal gains

593

Assets and liabilities of disposal groups

BASF intends to sell large parts of its fertilizer activities. To this end, BASF signed a contract on September 27, 2011, with EuroChem, Moscow, the Russian Federation, to sell its fertilizer activities in Antwerp, Belgium. The sale comprises production facilities for calcium ammonium nitrate and ammonium nitrate fertilizers, Nitrophoska® products, nitrophosphoric acid and the three related nitric acid plants. The sale will result in the transfer of around 330 employees.

The transaction with EuroChem still requires the approval of the antitrust authorities and is expected to be finalized during the first quarter of 2012.

Furthermore, as of the balance sheet date, BASF planned to sell its 50% share in the jointly controlled entity PEC-Rhin, Ottmarsheim, France to its partner GPN. PEC-Rhin owns and operates production facilities for calcium ammonium nitrate and ammonium nitrate fertilizers, as well as production facilities for the intermediates ammonia and nitric acid. This transaction was concluded on January 31, 2012.

The fertilizer activities in Antwerp and Ottmarsheim have a total annual capacity of approximately 2.5 million metric tons of fertilizer and account for less than 1% of BASF Group’s total sales. Fertilizer production plants at the Ludwigshafen site are not part of the transaction and will be retained by BASF.

The assets and liabilities have been reclassified into a disposal group. The values of the disposal group are shown in the following table:

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Fertilizer disposal group (million €)

 

 

Dec. 31, 2011

Intangible assets

Property, plant and equipment

45

Inventories

76

Accounts receivable, trade

172

Other receivables and other assets

1

Cash and cash equivalents

1

Assets of the disposal group

295

Provisions for pensions and similar obligations

Other provisions

17

Accounts payable, trade

46

Other liabilities

24

Liabilities of the disposal group

87

Net assets

208

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