3 – Acquisitions and Divestitures Acquisitions In 2020, BASF acquired the following activity: BASF closed the acquisition of Solvay’s polyamide business (PA 6.6) on January 31, 2020. Domo Chemicals, Leuna, Germany, was approved by the E.U. Commission as the buyer of the European polyamide business, which could not be acquired by BASF under the conditions imposed by the authorities. The transaction broadens BASF’s polyamide capabilities with innovative products. It also enhances the company’s access to growth markets in Asia as well as in North and South America. Through the backward integration into the key raw material adiponitrile (ADN), BASF is now integrated along the entire polyamide 6.6 value chain and can improve supply reliability. The purchase price of the business acquired by BASF was €1.319 million on a cash and debt-free basis. Of that amount, €1,308 million was already cash effective. The business was integrated into the Performance Materials and Monomers divisions. The transaction between Solvay and BASF included eight production sites in Germany, France, China, India, South Korea, Brazil and Mexico, as well as research and development and technical consultation centers in Asia and the Americas. It also included two shareholdings in France, which are accounted for as joint operations: The 50% interest in Butachimie SNC, Chalampé, France, to produce ADN and hexamethylenediamine, and the 51% interest in the newly established Alsachimie S.A.S., Chalampé, France, to produce adipic acid. With the acquisition, around 700 Solvay employees were transferred to BASF. Furthermore, some 1,000 employees of the Alsachimie S.A.S. and Butachimie SNC joint operations are to be included on a pro rata basis by BASF. The purchase price allocation considers all the facts and circumstances prevailing as of the date of acquisition that were known prior to the preparation of these financial statements. Goodwill of €20 million resulted in particular from sales synergies. The businesses acquired from Solvay accounted for €678 million of sales revenue and –€114 million in income from operations in the 2020 fiscal year. Including Solvay’s businesses and assets in BASF’s Consolidated Financial Statements as of January 1, 2020 would have resulted in a sales revenue contribution of €792 million and in income from operations of –€104 million. These pro forma data are for comparison purposes. They are not necessarily values that would have resulted had the transaction taken place as of January 1, 2020 and are not suitable for forecasting future developments or events. The majority of total goodwill is not tax deductible. In 2019, BASF acquired the following activity: BASF acquired 100% of shares in Isobionics B.V., Geleen, Netherlands, on September 26, 2019. The company develops and produces a wide range of natural flavors and fragrances with a focus on citrus oil components. This transaction strengthened the Nutrition & Health division. The preliminary purchase price allocation was immaterially revised in 2020, which led to an increase in goodwill of €1 million. (XLSX:) XLS Purchase price allocation for the acquisition of assets and liabilities from Solvay (Million €) Fair value as of date of acquisition Goodwill 20 Other intangible assets 670 Property, plant and equipment 559 Integral investments accounted for using the equity method – Non-integral investments accounted for using the equity method – Other financial assets – Deferred taxes 105 Other receivables and miscellaneous assets 3 Noncurrent assets 1,357 Inventories 156 Accounts receivable, trade 165 Other receivables and miscellaneous assets 160 Marketable securities – Cash and cash equivalents 68 Current assets 549 Total assets 1,906 Provisions for pensions and similar obligations 25 Deferred tax liabilities 172 Tax provisions – Other provisions 11 Financial indebtedness – Other liabilities 45 Noncurrent liabilities 253 Accounts payable, trade 273 Provisions 2 Tax liabilities 28 Financial indebtedness 8 Other liabilities 23 Current liabilities 334 Total liabilities 587 Total purchase price 1,319 The following overview shows the effects of acquisitions in 2020 and 2019 on the Consolidated Financial Statements. When acquisitions resulted in the transfer of assets or the assumption of additional liabilities, these are shown as a net impact. (XLSX:) XLS Effects of acquisitions and changes in the preliminary purchase price allocations 2020 2019 Million € %a Million € %a Goodwill 21 0.3 –47 –0.6 Other intangible assets 670 10.8 10 0.2 Property, plant and equipment 559 2.8 3 0.0 Financial assets – – – – Other noncurrent assets 108 2.5 2 0.1 Noncurrent assets 1,358 2.7 –32 –0.1 Current assets 548 1.8 94 0.3 of which cash and cash equivalents 68 1.6 0 0.0 Assets 1,906 2.4 62 0.1 Equity – – – – Noncurrent liabilities 264 0.9 –23 –0.1 of which financial indebtedness – – – – Current liabilities 334 2.1 –154 –0.9 of which financial indebtedness 8 0.0 – – Total equity and liabilities 598 0.7 –177 –0.2 Payments made for acquisitions 1,308 239 Additions of cash and cash equivalents –68 – 0 – Payments made for acquisitions according to statement of cash flows 1,240 239 a Proportional share in relation to the BASF Group Divestitures In 2020, BASF sold the following activity: On September 30, 2020 and on November 30, 2020, BASF closed the divestiture of its construction chemicals business to an affiliate of Lone Star, Dallas, Texas, a global private equity firm. The purchase price on a cash and debt-free basis was €3.17 billion. The sale covered approximately 7,500 employees as well as production sites and sales offices in more than 60 countries of the former Construction Chemicals division. From the signing of the agreement on December 21, 2019 until the closing of the transaction, BASF’s construction chemicals business was reported as a discontinued operation. The effects of the disposal are disclosed in the Notes under “Discontinued operations” In 2019, BASF sold the following activities: On January 31, 2019, following the approval of all relevant authorities, BASF and Solenis had concluded the transfer of BASF’s paper and water chemicals business to Solenis. Since February 1, 2019, the combined company has operated under the name Solenis UK International Ltd., London, United Kingdom, and offers bundled sales, service and production capabilities across the globe. BASF holds a 49% share in the combined entity; 51% of the shares are held by funds managed by Clayton, Dubilier & Rice, and by Solenis management. The transaction included production sites and plants of BASF’s paper and water chemicals business in Bradford and Grimsby, England; Suffolk, Virginia; Altamira, Mexico; Ankleshwar, India; and Kwinana, Australia. The divestiture affected the Performance Chemicals division. BASF and LetterOne completed the merger of Wintershall and DEA on April 30, 2019. On September 27, 2018, BASF and LetterOne had signed a transaction agreement to merge their respective oil and gas businesses in a joint venture, creating a leading independent European exploration and production company with international operations in core regions. LetterOne contributed all shares in DEA Deutsche Erdöl AG to Wintershall Holding GmbH and received new shares in the latter. The company was renamed Wintershall Dea GmbH, Kassel/Hamburg. Including preference shares, BASF has a shareholding of 72.7% in Wintershall Dea GmbH. No later than 36 months after closing but in all cases before an IPO, these preference shares will be converted into ordinary shares in Wintershall Dea GmbH. From the signing of the agreement in September 2018 until the closing of the merger, BASF’s oil and gas business was reported as a discontinued operation. Since the merger, BASF’s interest in Wintershall Dea GmbH has been accounted for as a non-integral shareholding using the equity method. The gain from the transition from full consolidation to the equity method was reported in income after taxes from discontinued operations. On December 6, 2019, BASF India Limited sold its stilbene-based optical brightening agents (OBA) business for paper and powder detergent applications to Archroma India Private Limited, Mumbai, India. The transaction included the stilbene-based OBA product portfolio and the production plant in Ankleshwar, India. The production plant was part of the Performance Chemicals division and the stilbene-based OBA product portfolio was allocated to the Performance Chemicals and Care Chemicals divisions. BASF sold its ultrafiltration membrane business to DuPont Safety & Construction on December 31, 2019. The divestiture included the shares of inge GmbH, the business’ headquarters and production site in Greifenberg, Germany, including all employees, its international sales force, and certain intellectual property rights which were previously owned by BASF SE. The ultrafiltration membrane business had been part of the Performance Chemicals division. The following overview shows the effects of the divestitures conducted in 2020 and 2019 on the Consolidated Financial Statements. The sales line item showed the year-on-year decline resulting from divestitures. Noncurrent assets in 2019 primarily included the addition of the investments accounted for using the equity method, Wintershall Dea GmbH and Solenis UK International Ltd., while current assets and current liabilities showed the assets and liabilities of the disposal groups. The impact on equity related mainly to gains and losses from divestitures. Agreed transactions On August 29, 2019, BASF and the fine chemicals company DIC, Tokyo, Japan, reached an agreement to transfer the global pigments business. The purchase price on a cash and debt-free basis is €1.15 billion. The transaction is expected to close in the first half of 2021. The sale is subject to approval by the relevant antitrust authorities. The transaction affects approximately 2,600 employees in the Dispersions & Pigments division. (XLSX:) XLS Effects of divestitures 2020 2019 Million € %a Million € %a Sales –91 –0.2 –414 –0.7 Noncurrent assets – – 14,686 26.2 of which property, plant and equipment – – –19 –0.1 Current assets –3,035 –10.2 –13,877 –44.8 of which cash and cash equivalentsb –89 – –802 – Assets –3,035 –3.8 809 0.9 Equity 607 1.8 6,562 15.5 Noncurrent liabilities – – 235 0.8 of which financial indebtedness – – – – Current liabilities –883 –5.4 –5,779 –34.8 of which financial indebtedness – – – – Total equity and liabilities –276 –0.3 1,018 1.2 Payments received from divestitures 2,759 209 Further effects in connection with divestituresc –239 – 2,391 – Payments received from divestitures according to statement of cash flows 2,520 2,600 a Proportional share in relation to the BASF Group b Includes €89 million from the discontinued construction chemicals business in 2020 and €800 million primarily from the discontinued oil and gas business in 2019 c Includes project-related tax payments and derecognition of cash and cash equivalents in 2020; and payments received from capital repayments, settlement of receivables and derecognition of cash and cash equivalents in 2019 Discontinued operations / disposal groups With the binding agreement on the sale of BASF’s construction chemicals business to a subsidiary of Lone Star, this business was presented as a discontinued operation. The disposal group was derecognized upon closing of the transaction in the fourth quarter of 2020. The transfer of the construction chemicals business occurred in two steps, on September 30, 2020 and on November 30, 2020. Of total comprehensive income after taxes attributable to BASF SE shareholders totaling –€4,737 million (2019: €9,370 million), €331 million (2019: €11 million) related to the discontinued construction chemicals business and –€5,068 million (2019: €2,422 million) to continuing operations. In 2019, the discontinued oil and gas business contributed €6,937 million to comprehensive income after taxes that is attributable to BASF SE shareholders. Earnings from the discontinued construction chemicals business until November 30, 2020 were as follows: (XLSX:) XLS Statement of income from the discontinued construction chemicals business (Million €) January 1– November 30,2020 January 1– December 31,2019 Sales revenue 1,814 2,553 Cost of sales –938 –1,412 Gross profit on sales 876 1,141 Selling expenses –503 –866 General administrative expenses –103 –66 Research and development expenses –26 –36 Other operating income and expenses –171 –121 Gain on the disposal before income taxes 566 – EBIT 639 52 Net income from shareholdings and financial result –8 –4 Income before income taxes 631 48 Income taxes –235 –24 Income after income taxes 396 24 of which attributable to noncontrolling interests 2 5 Income after noncontrolling interests 394 19 Earnings per share from discontinued operations € 0.43 0.02 Depreciation and amortization of property, plant and equipment and intangible assets – –162 of which impairments and reversals of impairments – –1 The calculation of the disposal gain on the discontinued construction chemicals business is presented in the following table: (XLSX:) XLS Calculation of disposal gain on the discontinued construction chemicals business (Million €) November 30,2020 Purchase price on a cash and debt-free basis 3,170 Purchase price adjustmentsa –407 Disposal income 2,763 Disposed net assets –2,117 Assets of the disposal group –3,066 Reinstated net assets 5 Liabilities of the disposal group 944 Noncontrolling interests 8 Other –88 Disposal gain before taxes 566 Income taxes –208 Disposal gain after taxes 358 a Purchase price adjustments take into account, among other things, cash, financial indebtedness and pension obligations. The discontinued construction chemicals business accounted for the following amounts in BASF’s statement of cash flows: (XLSX:) XLS Cash flows from the discontinued construction chemicals business (excluding effects from the divestiture) (Million €) January 1– November 30,2020 January 1– December 31,2019 Cash flows from operating activities 46 219 Cash flows from investing activities –118 –107 Cash flows from financing activities 9 –18 Total –63 94 Groups of assets and liabilities held for sale (disposal groups) With the agreement on the acquisition of the global pigments business by the fine chemical company DIC, the affected assets and liabilities were reclassified to a disposal group. The business is allocated to the Dispersions & Pigments division. Impairment tests were conducted for the disposal group for the pigments business as of December 31, 2019 and June 30, 2020. In accordance with IFRS 5, the fair value less costs to sell must be used as the recoverable amount and compared with the carrying amount. The recoverable amount was determined as of December 31, 2019 and June 30, 2020 by discounting the respective expected cash flows the planned transaction closing, including income from the sale, at a discount rate after taxes of 7.98%. This resulted in the need for impairment in the amount of €73 million as of December 31, 2019 and, additionally, of €66 million as of June 30, 2020, which was allocated to the goodwill of the disposal group for the pigments business. The impairment test as of December 31, 2020 revealed no need for a valuation adjustment. The values for the disposal group are presented in the following table. Other comprehensive income included –€116 million (2019: –€79 million) as of December 31, 2020 attributable to the business to be sold. (XLSX:) XLS Pigments business disposal group (Million €) December 31,2020 December 31,2019 Balance Sheet Goodwill –243 –336 Other intangible assets –21 –22 Property, plant and equipment –290 –266 Integral investments accounted for using the equity method – – Non-integral investments accounted for using the equity method –64 –65 Other financial assets –8 –8 Deferred tax assets –51 –58 Other receivables and miscellaneous assets –4 –2 Noncurrent assets –681 –757 Inventories –351 –383 Accounts receivable, trade –112 –109 Other receivables and miscellaneous assets –33 –22 Marketable securities – – Cash and cash equivalents –5 –7 Current assets –501 –521 Assets of the disposal group 1,182 1,278 Provisions for pensions and similar obligations –202 –213 Deferred tax liabilities –9 –17 Tax provisions – – Other provisions –9 –9 Financial indebtedness – – Other liabilities –8 –15 Noncurrent liabilities –228 –254 Accounts payable, trade –53 –51 Provisions –15 –20 Tax liabilities –5 –6 Financial indebtedness – – Other liabilities –40 –27 Current liabilities –113 –104 Liabilities of the disposal group 341 358 Net assets 841 920 back next