✓ audited

2.3 – Acquisitions and divestitures

Acquisitions

In 2012, BASF acquired the following activities:

  • On February 13, 2012, BASF acquired the Ovonic Battery Company, headquartered in Rochester Hills, Michigan. Ovonic is a license provider for nickel metal hydride (NiMH) battery technologies and produces cathode active materials (CAMs) for batteries. Furthermore, the company operates a research facility for battery materials in Troy, Michigan. Ovonic holds numerous patents and patent applications worldwide in the area of NiMH technology. The company was incorporated into the newly established Battery Materials business unit, a part of the Catalysts division.
  • BASF acquired B.C. Foam S.p.A.’s polyethylene terephthalate (PET) foams business, headquartered in Volpiano, Italy, effective February 29, 2012. The acquisition comprises production facilities and industrial property rights. PET foams are primarily used in wind turbine rotor blades. Moreover, high-quality PET foam panels are in demand in the automotive and aviation industries, as well as in shipbuilding. The acquired business has become part of the Performance Polymers division.
  • On April 25, 2012, BASF acquired the energy storage activities of Novolyte Technologies LP, headquartered in Cleveland, Ohio, which focus on developing, producing and marketing performance electrolyte formulations for lithium-ion batteries. These activities will continue operations as part of BASF’s Battery Materials unit. BASF also acquired the performance materials business from Novolyte Holdings LP, which has been integrated into the Intermediates division. As part of the acquisition, BASF is continuing the joint venture in Nantong, China, operated by Novolyte and its Korean partner, Foosung Co., Ltd. Foosung is a global producer of the high-purity specialty salt lithium hexafluorophosphate (LiPF6), an important material for manufacturing lithium-ion battery electrolytes. These electrolytes are key components in the fast-growing market for lithium-ion batteries for automotive, consumer and industrial applications.
  • BASF concluded the acquisition of the Brazilian Mazzaferro Group’s polyamide polymer business on May 2, 2012. The transaction comprises the site and production facilities for the polyamide-6 product range, as well as engineering plastics compounds at São Bernardo do Campo. BASF integrated the acquired activities into its existing engineering plastics and polyamide polymer business within the Performance Polymers division. The materials are used mainly in automotive and electrical applications.
  • On May 8, 2012, BASF acquired Equateq Ltd., a producer of highly concentrated omega-3 fatty acids based in Callanish, United Kingdom. With this acquisition, BASF is expanding the Nutrition & Health division’s portfolio of omega-3 products for the pharmaceutical and dietary supplement industries. Equateq’s proprietary technology allows flexible formulation of omega-3 fatty acids at exceptional purity levels.
  • BASF purchased ITWC Inc.’s business, headquartered in Malcom, Iowa, on July 1, 2012. The transaction, which primarily comprises cast elastomer systems and polyester polyols, complements BASF’s offering of polyurethane products, systems and specialties in North America. The business has been integrated into the Polyurethanes division. Typical applications for cast elastomers include industrial tires and rollers for on-site transportation, conveyer belts and pulleys.
  • Effective as of November 21, 2012, BASF acquired the Becker Underwood Group, which has its headquarters in Ames, Iowa. Becker Underwood is one of the leading global providers of technologies for biological seed treatment and seed treatment colors and polymers, as well as products in the areas of biological crop protection, turf and horticulture, animal nutrition and landscape design. The company has 479 employees and 10 production sites worldwide. Most of the Becker Underwood businesses will join the newly established Functional Crop Care global business unit as part of BASF’s Crop Protection division. Within this new unit, BASF will merge its existing research, development and marketing activities in the areas of seed treatment, biological crop protection, plant health, as well as water and resource management with those of Becker Underwood. Becker Underwood’s animal nutrition business will be integrated into BASF’s Nutrition & Health division. The purchase price of the shares on the acquisition date amounted to the equivalent of €748 million.

The following shows an overview of the preliminary book and fair values of the assets and liabilities acquired with the purchase of Becker Underwood as of November 21, 2012.

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Preliminary purchase price allocation for Becker Underwood acquisition in 2012 (million €)

 

Historical carrying amount

Fair value adjustments

Fair value at time of acquisition

Long-term assets

158

243

401

Property, plant and equipment

24

6

30

Goodwill

60

(60)

Other intangible assets

55

252

307

Financial assets and other long-term assets

19

45

64

 

 

 

 

Short-term assets

108

6

114

Inventories

27

6

33

Accounts receivable, trade

53

53

Cash on hand/bank balance

10

10

Other short-term assets

18

18

Assets

266

249

515

 

 

 

 

Long-term liabilities

19

117

136

Deferred tax liabilities

17

117

134

Other liabilities

2

2

 

 

 

 

Short-term liabilities

130

130

Financial indebtedness

86

86

Other liabilities

44

44

Liabilities

149

117

266

 

 

 

 

Net assets

117

132

249

Goodwill

 

 

499

 

 

 

 

Total purchase price

 

 

748

Goodwill represents the assets which are not separable when conducting the purchase price allocation. It primarily relates to the employee know-how and synergies from the integration of the acquired businesses as well as, to a lesser extent, the combination of functional units. Becker Underwood contributed €19 million to sales and less than €1 million to net income in fiscal year 2012. The purchase price allocation for Becker Underwood should be regarded as preliminary. In accordance with IFRS, the purchase price allocation may be finalized within one year of the acquisition date.

  • On December 5, 2012, BASF made a public takeover bid to the shareholders of Pronova BioPharma ASA, headquartered in Lysaker, Norway, for all shares in return for a cash payment of NOK 12.50 per share. By the end of the extended offer period on January 18, 2013, BASF was tendered 97.7% of all shares at an increased offer price of NOK 13.50 per share. The remaining shares were acquired on January 31, 2013, by means of a squeeze-out procedure with the previously tendered shares and the transaction was concluded. The total purchase price amounted to the equivalent of €526 million. Including net financial liabilities, the enterprise value of Pronova amounts to the equivalent of €672 million.

BASF acquired the following businesses in 2011:

  • On August 16, 2011, BASF completed the acquisition of inge watertechnologies AG and inge GmbH, Greifenberg, Germany, a specialist for ultrafiltration technology. This acquisition gave 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 2011, 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., a jointly controlled entity with the Belgian company Electrabel that runs the combined heat and power (CHP) plant at the BASF site in Antwerp, Belgium.

The following overview shows the effects of the preliminary purchase price allocations of the acquisitions conducted in 2012 and 2011 as of the acquisition date.

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Effects of acquisitions in the year of acquisition

 

2012

 

2011

 

Million €

%

 

Million €

%

Long-term assets

1,259

3.5

 

213

0.6

Goodwill

586

9.2

 

50

0.8

Other intangible assets

487

8.3

 

91

1.5

Property, plant and equipment

106

0.6

 

66

0.4

Financial assets

70

2.4

 

Other assets

10

0.2

 

6

0.4

Short-term assets

167

0.6

 

23

0.1

Thereof cash and cash equivalents

12

0.7

 

1

0.1

Assets

1,426

2.2

 

236

0.4

 

 

 

 

 

 

Equity

4

.

 

10

.

Long-term liabilities

211

1.0

 

56

0.3

Thereof financial indebtedness

 

Short-term liabilities

156

0.9

 

21

0.1

Thereof financial indebtedness

86

2.0

 

Total equity and liabilities

371

0.6

 

87

0.1

Payments for acquisitions

1,055

 

 

149

 

Assets and liabilities of disposal groups

  • On November 14, 2012, BASF and Gazprom agreed to swap assets of equal value. Subject to the approval by the relevant authorities, the transaction is to be completed by the end of 2013 and financially retroactive to April 1, 2013. Under the agreement, BASF will receive 25% plus one share in the blocks IV and V in the Achimov formation of the Urengoy natural gas and condensate field in Western Siberia, with the possibility to increase this shareholding in the future. According to the development plan, blocks IV and V have total hydrocarbon resources of 274 billion cubic meters of natural gas and 74 million metric tons of condensate. A total annual plateau production of at least 8 billion cubic meters of natural gas is expected from the two blocks. Start of production is planned for 2016. In return, BASF will completely transfer its share in the jointly operated natural gas trading and storage business to its partner Gazprom. This includes the 50% shares in the natural gas trading companies WINGAS GmbH and Wintershall Erdgas Handelshaus GmbH & Co. KG, including their subsidiaries, and shares in the natural gas storage facilities in Rehden and Jemgum, Germany, and in Haidach, Austria. Gazprom will also receive a 50% share in the activities of Wintershall Noordzee B.V., which is active in the exploration and production of oil and gas in the southern North Sea (the Netherlands, the United Kingdom and Denmark). The assets and liabilities of the activities to be transferred were reclassified into a disposal group at year-end 2012.

The values of the disposal group are shown in the following table:

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Natural gas trading disposal group (million €)

 

Dec. 31, 2012

Intangible assets

92

Property, plant and equipment

983

Inventories

692

Accounts receivable, trade

1,457

Positive fair values of derivatives

39

Other receivables and miscellaneous assets

140

Cash and cash equivalents

14

Assets of the disposal group

3,417

Provisions for pensions and similar obligations

21

Other provisions

523

Accounts payable, trade

1,402

Negative fair values of derivatives

45

Other liabilities

241

Liabilities of the disposal group

2,232

Net assets

1,185

In 2012, the companies included in the natural gas trading disposal group contributed €11,385 million to BASF Group sales.

Divestitures

In 2012, BASF divested the following activities:

  • As of January 31, 2012, BASF sold its 50% share in the jointly controlled entity PEC-Rhin S.A., Ottmarsheim, France, to its joint venture partner GPN, Courbevoie, France. 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. The net assets that had been reported as part of the fertilizer disposal group were deconsolidated as of the date of sale. The following table shows the calculation of gains on the disposal of BASF’s share in PEC-Rhin:
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Profit realization from the deconsolidation of PEC-Rhin (million €)

1

On December 31, 2011, the assets and liabilities of the fertilizer business were reported separately as part of the disposal group.

Proceeds from divestiture

34

Disposed net assets as part of the disposal group 1

(13)

Reinstated receivables and payables, realized intercompany profits

4

Disposal gains

25

  • The sale of BASF’s fertilizer activities in Antwerp, Belgium, to EuroChem, Moscow, Russia, which had been agreed upon on September 27, 2011, was completed on March 31, 2012, after approval was granted by anti-trust authorities. The sale comprises production facilities for calcium ammonium nitrate and ammonium nitrate fertilizers, NPK fertilizers (nitrogen, phosphate, potassium), nitrophosphoric acid and three related nitric acid plants. The sale resulted in the transfer of 330 employees. The following table shows the assets and liabilities disposed as a result of the sale to EuroChem as of the date of disposal:
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Fertilizer disposal group (excluding PEC-Rhin) as of the date of disposal (million €)

1

On December 31, 2011, the assets and liabilities of the fertilizer business were reported separately as part of the disposal group.

Disposed assets as part of the disposal group 1

237

Disposed liabilities as part of the disposal group 1

(33)

Net assets

204

BASF’s proceeds from the divestiture amounted to €670 million. In addition, EuroChem will pay BASF a cash compensation of €175 million in the period from 2012 to 2016. The fair value of this compensation on the date of disposal amounted to €162 million.

In addition to the disposed assets and liabilities from the disposal group, the disposal gains were reduced by other effects resulting from contractual adjustment clauses and expenses resulting from the divestiture. In the segment reporting, the entire fertilizer business was reported under Other. The following overview shows the individual components of the calculation of disposal gains:

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Profit realization from the sale of fertilizer activities (excluding PEC-Rhin) (million €)

1

On December 31, 2011, the assets and liabilities of the fertilizer business were reported separately as part of the disposal group.

Proceeds from divestiture

670

Compensation claim

162

Disposed net assets as part of the disposal group 1

(204)

Other effects of the divestiture

(8)

Disposal gains

620

  • On August 30, 2012, BASF concluded the sale of its offset printing inks business (IMEX), announced on March 15, 2012, to Quantum Kapital AG, headquartered in St. Gallen, Switzerland. The divestiture covers all offset printing inks activities as well as the transfer of all employees at the site in Maastricht, the Netherlands, assigned to the business. The business had been part of the Dispersions & Pigments division.
  • As of November 30, 2012, BASF completed the divestiture of the decorative paints business of Relius Coatings GmbH & Co. KG, Oldenburg, Germany, and of the participation in Relius France S.A.S., Ostwald, France. The business had been part of the Coatings division. The buyer, PROSOL Lacke + Farben GmbH, based in Aschaffenburg, Germany, acquired the Memmingen site as well as around 30 distribution points in Germany and France.
  • As of December 19, 2012, BASF sold its Capcure® brand curative business to Gabriel Performance Products LLC, based in Ashtabula, Ohio. The business had been part of the Dispersions & Pigments division.

In 2011, BASF divested the following activities:

  • On April 1, 2011, N.E. Chemcat Corporation, Tokyo, Japan, an entity jointly controlled by BASF and 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 included solutions for precious metals as well as apparatus engineering for electroplating applications, which were 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.
  • On August 31, 2011, the bisomer monomer business and the conventional contact lens business of Cognis were divested to GEO Specialty Chemicals Inc. In this way, BASF fulfilled the condition set down by the European Commission for its approval of the Cognis acquisition. The transaction included production facilities in Hythe, United Kingdom.
  • On October 1, 2011, BASF transferred its styrenics disposal group activities to Styrolution, a joint venture founded with INEOS at this time. The 50% share held by BASF is accounted for using the equity method in the Consolidated Financial Statements. 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. In connection with the founding of Styrolution, BASF received a cash consideration of €600 million as compensation for the value difference between the businesses contributed by both joint venture partners. The reported disposal gain of €593 million was 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 effects of the divestitures in 2012 and 2011 on the consolidated balance sheet. 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.

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Effects of divestitures in the year of divestiture

 

2012

 

2011

 

Million € 

%

 

Million € 

%

Sales

(810)

(1.1)

 

(361)

(0.5)

 

 

 

 

 

 

Long-term assets

84

0.2

 

728

2.1

Thereof property, plant and equipment

(16)

(0.1)

 

(13)

(0.1)

Short-term assets

(263)

(0.9)

 

(735)

(2.7)

Thereof cash and cash equivalents

(7)

(0.4)

 

(2)

(0.1)

Assets

(179)

(0.3)

 

(7)

.

 

 

 

 

 

 

Equity

400

1.6

 

586

2.3

Long-term liabilities

154

0.7

 

148

0.8

Thereof financial indebtedness

(1)

.

 

Short-term liabilities

(2)

.

 

(74)

(0.4)

Thereof financial indebtedness

 

Total equity and liabilities

552

0.9

 

660

1.1

Proceeds from divestitures

731

 

 

667