3 – Acquisitions and divestitures

Acquisitions

BASF made the following acquisitions in the first three quarters of 2015:

On February 12, 2015, BASF concluded the acquisition announced on December 8, 2014, of the business from Taiwan Sheen Soon (TWSS) in Taiwan. TWSS is a leading manufacturer of precursors for adhesives based on thermoplastic polyurethanes. At BASF, 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 authorities’ approvals, and is expected to transpire in the course of the year.

On February 18, 2015, BASF took over technologies, patents and know-how for silver nanowires from Seashell Technology, based in San Diego, California. Through this acquisition, BASF has extended its product portfolio for displays in the Electronic Materials business unit, which is part of the Monomers division.

As announced on October 30, 2014, BASF acquired a 66% share from TODA KOGYO CORP., based in Tokyo, Japan, in a company to which TODA had contributed its business with cathode materials for lithium-ion batteries, patents and production capacities in Japan. The transaction was effective on February 24, 2015. The company will focus on the research, development, production, marketing and sales of a number of cathode materials. At BASF, the activities were assigned to the Catalysts division.

On March 31, 2015, BASF concluded the acquisition of the PU business from Polioles, S.A. de C.V., based in Lerma, Mexico, that was announced on July 10, 2014. Polioles is a joint venture with the Alpek Group in which BASF holds a 50% share and which is accounted for using the equity method. The acquisition comprised marketing and selling rights, current assets, and to a minor extent, production facilities. The business was assigned to the Performance Materials division.

On April 23, 2015, BASF concluded an agreement with Lanxess on the acquisition and use of technologies and patents for the production of high-molecular-weight polyisobutene (HM PIB). The transaction furthermore included the acquisition of selling rights and current assets as well as a manufacturing agreement in which Lanxess will produce HM PIB exclusively for BASF. The activities were allocated to the Performance Chemicals division.

The purchase prices for businesses acquired in the first three quarters of 2015 totaled €218 million; as of September 30, 2015, payments made for these amounted to €137 million. The purchase price allocations were carried out in accordance with IFRS 3 and are based on estimates. The resulting goodwill amounted to €18 million. The purchase price allocations should be regarded as preliminary and can be adjusted within one year after the acquisition.

Divestitures

BASF made the following divestitures in the first three quarters of 2015:

On March 31, 2015, BASF sold its business with white EPS (expandable polystyrene) in North and South America to the Alpek Group. The sale comprised customer lists and current assets in addition to production facilities in Canada, Brazil, Argentina and the United States. The disposed activities had been part of BASF’s Performance Materials division. The shares in Aislapol S.A., based in Santiago de Chile, Chile, were also sold. Polioles, a joint venture accounted for using the equity method, transferred its white EPS business to Alpek.

On June 30, 2015, BASF concluded the divestiture announced on October 16, 2014, of its global textile chemicals business to Archroma. The portfolio comprises products for pretreatment, printing and coating. Archroma is a supplier of specialty chemicals for the textile, paper and emulsions industries and belongs to SK Capital Partners. The transaction furthermore involved the sale of the subsidiary BASF Pakistan (Private) Ltd., based in Karachi, Pakistan, completed in the third quarter of 2015. The textile chemicals business had been part of the Performance Chemicals division.

Effective July 1, 2015, BASF sold its 25% share in the SolVin joint venture to its partner, Solvay. SolVin was founded in 1999 as a joint venture between BASF and Solvay for polyvinyl chloride (PVC). At BASF, the SolVin investment and the income associated with it had been allocated to the Monomers division.

On September 30, 2015, BASF concluded the sale of portions of its pharmaceutical ingredients and services business to Siegfried Holding AG, based in Zofingen, Switzerland, as agreed on May 6, 2015. This involved the custom synthesis business and parts of the active pharmaceutical ingredients portfolio. The transaction comprised the divestiture of the production sites in Minden, Germany; Evionnaz, Switzerland; and Saint-Vulbas, France. At BASF, the activities had been allocated to the Nutrition & Health division.

Asset swap with Gazprom

In its Oil & Gas segment, BASF concluded the swap of assets of equal value with Gazprom on September 30, 2015, with retroactive economic effect to April 1, 2013. The transaction gives BASF an economic share of 25.01% in blocks IV and V of the Achimov formation of the Urengoy natural gas and condensate field in western Siberia. According to the development plan confirmed by Russian authorities, blocks IV and V have total hydrocarbon resources of 274 billion cubic meters of natural gas and 74 million metric tons of condensate. Production is scheduled to start up in 2018.

In return, BASF transferred its share in the previously jointly operated gas trading and storage business to Gazprom. This involves 50% shares in the natural gas trading companies WINGAS GmbH, Wintershall Erdgas Handelshaus GmbH & Co. KG, and Wintershall Erdgas Handelshaus Zug AG, including shares in the storage company astora GmbH & Co. KG, which operates natural gas storage facilities in Rehden and Jemgum, Germany, as well as shares in the storage facility in Haidach, Austria. Gazprom furthermore became a 50% shareholder in Wintershall Noordzee B.V. in Rijswijk, Netherlands, which is active in the exploration and production of natural gas and crude oil deposits in the North Sea. Because the transaction is economically retroactive to April 1, 2013, BASF will pay Gazprom a cash compensation estimated at €75 million. The calculation of disposal gains should therefore be viewed as preliminary.

As a result of its disposal of 50% of Wintershall Noordzee B.V., BASF no longer exerts control over the company alone, but rather shares joint control with Gazprom. According to IFRS 10, this means the reclassification of Wintershall Noordzee B.V. in the Consolidated Financial Statements from a fully consolidated company to a joint venture accounted for using the equity method as of the closing date.

The following table shows the balance sheet values of the assets and liabilities given to Gazprom through the swap, taking into account 100% of the balance sheet values of Wintershall Noordzee B.V., as of the point of transfer from full consolidation to the equity method:

The acquisition of the 25.01% economic share in blocks IV and V of the Achimov formation was conducted through a capital share in two Russian companies that will be equity-accounted as associated companies in BASF’s Consolidated Financial Statements due to the material influence BASF exercises over them. As of September 30, 2015, both companies, together with the now-50% share in Wintershall Noordzee B.V., were measured at fair value and reported as investments accounted for using the equity method.

The following overview shows the individual components of BASF’s profit realization from the asset swap with Gazprom and the reclassification of Wintershall Noordzee B.V.:

Agreed-upon transactions

On June 8, 2015, BASF announced the conclusion of an agreement with Paris, France-based Imerys on the sale of its global paper hydrous kaolin (PHK) business. The transaction includes the divestiture of the production site for kaolin processing in Wilkinson County, Georgia. BASF will continue to synthesize kaolin for process catalysts and industrial applications, and calcined kaolin for paper applications. Subject to approval by the relevant antitrust authorities, the transaction is expected to close in the fourth quarter of 2015. The activities are currently allocated to the Performance Chemicals division.

On June 18, 2015, BASF concluded an agreement to divest its assets in the four non-BASF-operated fields Knarr, Veslefrikk, Ivar Aasen and Yme on the Norwegian continental shelf to Tellus Petroleum AS, a 100% subsidiary of Sequa Petroleum N.V. At the same time, BASF will reduce its share in the BASF-operated Maria development by 15% to 35%. Shares in seven exploration licenses surrounding the Knarr, Maria and Ivar Aasen fields and in the Barents Sea, as well as investments in the Utsira High Gas Pipeline, Edvard Grieg Oil Pipeline and the Knarr Gas Pipeline, will also be sold to Tellus Petroleum. The purchase price agreed upon amounts to $602 million. Depending on oil price developments in the period from 2016 to 2019, BASF can furthermore claim an additional payment of up to $100 million. The transaction is expected to close at the end of 2015 with retroactive financial effect as of January 1, 2015, subject to approval by the relevant authorities. The assets and liabilities were reclassified into a disposal group on June 18, 2015.