2.4 – Acquisitions and divestitures

Acquisitions

In 2014, BASF acquired the following activities:

  • On October 31, 2014, BASF completed the acquisition of a 2.5% share in the Brage production field in the Norwegian North Sea from Tullow Oil Norge AS, Oslo, Norway, in the Oil & Gas segment. The transaction was concluded with retroactive commercial effect as of January 1, 2014. With this acquisition, BASF increased its investment in Brage to a total of 35.2%.
  • In the Oil & Gas segment, BASF concluded with Statoil the agreed purchase of shares in the Gjøa (5%) and Vega (24.5%) production fields, the Aasta Hansteen development project (24%), the Asterix discovery (19%) and the Polarled Pipeline Project (13.2%), as well as in four exploration licenses near Aasta Hansteen on December 1, 2014. The purchase price amounted to $1.25 billion or €1.0 billion. Furthermore, BASF has agreed to pay an additional $50 million if the Aasta Hansteen field is developed according to current project plans. The transaction was concluded with retroactive commercial effect as of January 1, 2014. For this reason, earnings from shares in the production as well as investments made have led to purchase price adjustments. Furthermore, a provision has been recognized in the amount of contingent consideration expected to be paid in the future.

The following overview shows the components of the total purchase price for the acquisition of assets from Statoil on December 1, 2014.

Total purchase price of the acquisition of assets from Statoil (in milion €)

 

 

01.12.2014

Total purchase price

 

1,002

Expected amount of contingent consideration

 

10

Purchase price adjustments

 

(45)

Total purchase price

 

967

The following table shows an overview of the preliminary fair values of the assets and liabilities acquired from Statoil as of December 1, 2014.

Preliminary purchase price allocation of the assets and liabilities of Statoil as of December 1, 2014 (in million €)

 

 

Fair value at time of acquisition

Property, plant and equipment

 

977

Other intangible assets

 

121

Financial assets and other noncurrent assets

 

65

Noncurrent assets

 

1,163

 

 

 

Inventories

 

4

Accounts receivable, trade

 

Cash and cash equivalents

 

Other current assets

 

Current assets

 

4

Assets

 

1,167

 

 

 

Provisions for pensions and similar obligations

 

Other long-term provisions

 

53

Deferred tax liabilities

 

521

Other noncurrent liabilities

 

Noncurrent liabilities

 

574

 

 

 

Financial indebtedness

 

Provisions

 

26

Other current liabilities

 

183

Current liabilities

 

209

Liabilities

 

783

 

 

 

Net assets

 

384

Goodwill

 

583

 

 

 

Total purchase price

 

967

The transfer of assets from Statoil increased sales in the 2014 business year by €28 million and net income by €3 million. If the acquired assets had been included as of January 1, 2014, pro forma sales and income would have amounted to €365 million and €45 million, respectively.

The purchase prices for the businesses acquired in 2014 totaled €973 million, including noncash purchase price components. The payments for acquisitions amounted to €963 million. The purchase price allocations were carried out in accordance with IFRS 3 and are based on estimates. The purchase price allocations should be regarded as preliminary and can be adjusted within one year after the acquisition.

The preliminary purchase price allocation from the previous year for the acquisition of assets from Statoil on July 31, 2013, was reviewed at the end of the 12-month evaluation period as per IFRS 3; parts were adjusted on the basis of more detailed information on the production profiles of the acquired Vega, Brage and Gjøa fields. This led to a €20 million reduction in noncurrent assets to €1,413 million, and a €22 million reduction in noncurrent liabilities to €954 million. Furthermore, the expected value of the payment obligation to Statoil in connection with the development of the Vega field rose by €42 million, resulting in a corresponding increase in the total purchase price to €895 million. These adjustments brought about a €40 million increase in goodwill, which amounted to €683 million.

The purchase price allocations of the other acquisitions from the previous year were not adjusted.

  • On February 12, 2015 BASF concluded the acquisition of the business from Taiwan Sheen Soon (“TWSS”) in Taiwan, which had been announced on December 8, 2014. The purchase price for these activities amounted to $36 million. The purchase price allocation according to IFRS 3 is currently being prepared. TWSS is a leading manufacturer of precursors for adhesives based on thermoplastic polyurethanes. The activities have been integrated in the Performance Materials division. The acquisition of further assets on the Chinese mainland to complete the transaction is dependent on external approvals which is expected in the course of 2015.

BASF acquired the following businesses in 2013:

  • On January 31, 2013, BASF took over all the shares of Pronova BioPharma ASA, Lysaker, Norway, which researches, develops and produces highly concentrated omega-3 fatty acids. With the acquisition of Pronova BioPharma ASA, BASF aims to take a leading position in the global market for omega-3 fatty acids. Pronova BioPharma ASA’s business has been merged with BASF’s previous activities within the Nutrition & Health division into a global business unit.
  • Effective March 11, 2013, BASF completed its acquisition of parts of Ciech Group’s TDI business, as announced in the third quarter of 2012. The acquisition largely comprised intellectual property rights and access to customers. TDI is used primarily in furniture and automotive industry applications. The acquired business has been integrated into the Monomers division.
  • BASF acquired an enzyme technology for detergents and cleaners from Henkel AG & Co. KGaA, Düsseldorf, Germany, on April 17, 2013. The transaction comprised production hosts, various detergent enzymes, and the corresponding intellectual property. The activities have been integrated into the Care Chemicals division.
  • BASF concluded the acquisition of assets from Statoil, Stavanger, Norway, effective July 31, 2013. The transaction included the acquisition of shares in the Brage (32.7%), Vega (30%) and Gjøa (15%) fields and the activities were integrated into the Oil & Gas segment. In return, Statoil received a 15% share in the Edvard Grieg development project as well as financial compensation of $1.35 billion, which translates to €1.02 billion. BASF will pay up to a maximum of an additional $100 million contingent on the successful development of the Vega field. The transaction was concluded with retroactive financial effect as of January 1, 2013.
  • Effective October 31, 2013, BASF completed the acquisition of all shares in the Verenium Corporation, based in San Diego, California. Verenium Corporation develops and markets high-quality enzymes which, as catalysts, enable and accelerate biological and chemical processes. At the time of acquisition, the acquired activities were allocated to the Performance Products segment as well as to Other.

The following overview shows the effects of the acquisitions conducted in 2014 and 2013 on the Consolidated Financial Statements. If acquisitions resulted in the transfer of assets or the assumption of additional liabilities, these are shown as a net impact.

Effects of acquisitions

 

 

2014

2013

 

 

Million €

%

Million €

%

Goodwill

 

623

7.7

779

11.2

Other intangible assets

 

109

2.3

310

5.8

Property, plant and equipment

 

1,001

4.3

1,386

7.2

Financial assets

 

Other noncurrent assets

 

67

1.8

236

12.5

Noncurrent assets

 

1,800

4.1

2,711

7.1

Current assets

 

4

0.0

276

1.1

Thereof cash and cash equivalents

 

69

3.8

Assets

 

1,804

2.5

2,987

4.7

 

 

 

 

 

 

Equity

 

2

0.0

164

0.6

Noncurrent liabilities

 

621

2.3

1,094

4.9

Thereof financial indebtedness

 

19

0.2

Current liabilities

 

218

1.4

504

3.5

Thereof financial indebtedness

 

171

5.3

Total equity and liabilities

 

841

1.2

1,762

2.7

Payments related to acquisitions

 

963

 

1,225

 

Divestitures

In 2014, BASF divested the following activities:

  • On March 25, 2014, BASF concluded the sale of selected oil and gas investments in the North Sea to the Hungarian MOL Group, as agreed upon on December 12, 2013. MOL acquired 14 licenses, including those for the non-BASF-operated Broom field (29%) and for the Catcher (20%), Cladhan (33.5%) and Scolty/Crathes (50%) developments. The transaction also included the sale of BASF’s shares in the infrastructure of the Sullom Voe Terminal and in the Brent Pipeline System. The transaction was financially retroactive to January 1, 2013. The purchase price agreed upon was $375 million; less adjustments, the total purchase price amounted to €264 million as well as income of €132 million.
  • On June 2, 2014, BASF completed the sale of its PolyAd Services business to Edgewater Capital Partners, L.P. PolyAd Services provides services for a wide range of plastic applications in various industries, such as the automotive, construction, packaging and electronics industries. The activities had been allocated to the Performance Chemicals division.
  • Effective as of November 17, 2014, BASF sold its 50% share in Styrolution Holding GmbH to the INEOS Group. The partnership agreement of 2011 already included a cross option giving BASF an option to sell its share in Styrolution and INEOS an option to buy BASF’s share in Styrolution. On June 30, 2014, the equity-accounted carrying amount of Styrolution and these options were reclassified into assets and liabilities of disposal groups and the equity method was discontinued. At the time of the disposal, a total income of €458 million was recognized as other operating income. The share in Styrolution and the related income was allocated to Other.

The following overview shows the individual components of BASF’s profit realization from the sale of the 50% share in Styrolution:

Profit from the sale of the 50% share in Styrolution Holding GmbH (in million €)

 

 

Nov. 17, 2014

Purchase price

 

1,109

Disposal of 50% share in Styrolution

 

(776)

Derecognition of pro rata currency translation effects

 

(33)

Derecognition of options for disposal of BASF’s share

 

158

Disposal gains

 

458

  • On December 31, 2014, BASF completed the sale of its 50% stake in the joint operation Ellba Eastern Private Ltd., Singapore, which produces propylene oxide and styrene monomers, to its partner Shell. On account of the continued importance of propylene oxide and its value chain, BASF and Shell concluded an agreement to supply BASF with the necessary volumes. As a result of the divestiture a gain of €109 million was recognized. The activities of Ellba Eastern were allocated to BASF’s Petrochemicals division as well as Other.

In 2013, BASF divested the following activities:

  • Effective April 2, 2013, BASF concluded the sale of its sprayed concrete technology business for tunneling and mining to Atlas Copco, announced in the fourth quarter of 2012. The transaction comprised the production site in Winterthur, Switzerland, and the sales and service activities in Hermsdorf, Germany. The business had been part of the Construction Chemicals division.
  • On July 1, 2013, BASF sold its activities in the CONICA Sports Surfaces business, including the site in Schaffhausen, Switzerland, to the Serafin Group, Munich, Germany. The sale included the development, production and marketing of flooring systems for running tracks, gymnasiums, tennis courts and playgrounds as well as artificial turf solutions. The activities had been part of the Construction Chemicals division.
  • On September 30, 2013 BASF concluded the sale of Industrial Water Management France S.A.S., Lyon, France, to Degrémont, a subsidiary of SUEZ ENVIRONNEMENT, as announced on May 15, 2013. The business had been part of the Performance Chemicals division.
  • On December 31, 2013, BASF concluded the sale of Wall Systems GmbH & Co., Marktredwitz, Germany, to ROCKWOOL as announced on July 18, 2013. The company’s main business was in systems for internal and external building insulation as well as for the renovation and restoration of historical structures. The activities had been part of the Construction Chemicals division.
  • A supplementary agreement to the articles of association for GASCADE Gastransport GmbH expired on December 31, 2013. With the resulting change in the corporate governance structure, BASF lost control over GASCADE Gastransport GmbH, and since that time, has only a significant influence over the shareholding. According to IFRS 10, this resulted in a reclassification from fully consolidated company to an associated company accounted for using the equity method in the BASF Group Consolidated Financial Statements as of the effective date. BASF continues to hold a 50.02% share in GASCADE Gastransport GmbH.

The following overview shows the effects of the divestitures conducted in 2014 and 2013 on the Consolidated Financial Statements. The line item sales reflects the year-on-year decline resulting from divestitures. The impact on equity relates mainly to gains and losses from divestitures.

Effects of divestitures

 

 

2014

2013

 

 

Million €

%

Million €

%

Sales

 

(157)

(0.2)

(208)

(0.3)

 

 

 

 

 

 

Noncurrent assets

 

(343)

(0.8)

(345)

(0.9)

Thereof property, plant and equipment

 

(250)

(1.1)

(895)

(4.7)

Current assets

 

(644)

(2.3)

297

1.1

Thereof cash and cash equivalents

 

(1)

0.0

(3)

(0.2)

Assets

 

(987)

(1.4)

(48)

(0.1)

 

 

 

 

 

 

Equity

 

763

2.7

233

0.8

Noncurrent liabilities

 

(104)

(0.4)

(200)

(0.9)

Thereof financial indebtedness

 

Current liabilities

 

(309)

(1.9)

(14)

(0.1)

Thereof financial indebtedness

 

Total equity and liabilities

 

350

0.5

19

0.0

Proceeds from divestitures

 

1,337

 

67

 

Agreed-upon future transactions

  • On July 10, 2014, BASF announced the signing of an agreement with the Alpek Group concerning the expandable polystyrene (EPS) and polyurethane (PU) business activities of their joint venture Polioles, S.A. de C.V., Mexico. Polioles is consolidated using the equity method. The transaction includes the sale of BASF’s white EPS business in North and South America. This involves its production facilities and access to customers as well as all the shares of its affiliated companies Aislapol S.A., Santiago de Chile, Chile, und BASF Poliestireno Expansivel do Brasil Ltda., Guaratinguetá, Brazil. In parallel, Alpek receives all EPS business activities from Polioles. As a further part of the agreement BASF is acquiring Polioles’ PU business. The activities to be transferred are assigned to BASF’s Performance Materials division into which the acquired PU business will be integrated. Closing is expected by the end of the first quarter of 2015.
  • On October 16, 2014, BASF announced the conclusion of an agreement to sell its global textile chemicals business to Archroma. Archroma is a supplier of specialty chemicals for the textile, paper and emulsions industries and belongs to SK Capital Partners. The activities to be sold are part of BASF’s Performance Chemicals division. The transaction, subject to approval from the relevant antitrust authorities, is expected to close in the middle of 2015.
  • On October 30, 2014, BASF announced the establishment of a company with TODA KOGYO CORP., a leading company in the development and production of cathode materials for lithium-ion batteries in Japan. BASF will hold a 66% share and TODA a 34% share in the company, in which both firms will bundle their business for cathode materials, patents and production capacities in Japan. In BASF, the activities will be assigned to the Catalysts division. The conclusion of the agreement and the start of operations of the newly established company are expected by the end of February 2015.