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.
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.

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.

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.
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:

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:

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:

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.

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