3 – Acquisitions and Divestitures

Acquisitions

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 and well-known products such as Technyl®. 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 represented along the entire polyamide 6.6 value chain and can offer improved delivery reliability. The purchase price of the business acquired by BASF was €1.3 billion on a cash and debt-free basis. 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 investments 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.

The preliminary 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 Consolidated Half-Year Financial Statements. In accordance with IFRS 3, should further such facts and circumstances become known within the 12-month measurement period, the purchase price allocation can be adjusted accordingly.

Goodwill of €118 million resulted in particular from cost and sales synergies.

Preliminary purchase price allocation for the acquisition of assets and liabilities from Solvay (Million €)

 

Fair value as of date of acquisition

Goodwill

118

Other intangible assets

650

Property, plant and equipment

434

Investments accounted for using the equity method

Other financial assets

Deferred taxes

8

Other receivables and miscellaneous assets

55

Noncurrent assets

1,265

Inventories

153

Accounts receivable, trade

165

Other receivables and miscellaneous assets

161

Marketable securities

Cash and cash equivalents

63

Current assets

542

Total assets

1,807

 

 

Provisions for pensions and similar obligations

30

Tax provisions and deferred tax liabilities

35

Other provisions

8

Financial indebtedness

Other liabilities

45

Noncurrent liabilities

118

Accounts payable, trade

274

Provisions

2

Tax liabilities

28

Financial indebtedness

3

Other liabilities

74

Current liabilities

381

Total liabilities

499

 

 

Total purchase price

1,308

Agreed transactions

  • On August 29, 2019, BASF and the fine chemicals company DIC, Tokyo, Japan, signed an agreement on the transfer of 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 fourth quarter of 2020. The sale is subject to approval by the relevant antitrust authorities. The transaction affects approximately 2,600 employees in the Dispersions & Pigments division.
  • On December 21, 2019, BASF and a subsidiary of Lone Star, Dallas, Texas, signed an agreement on the sale of BASF’s construction chemicals business. The purchase price on a cash and debt-free basis is €3.17 billion. The transaction is expected to close in the third quarter of 2020, subject to the approval of the relevant antitrust authorities. The planned sale covers more than 7,000 employees as well as production sites and sales offices in more than 60 countries in the former Construction Chemicals division.

Discontinued operations

Earnings from the discontinued construction chemicals business were as follows:

Statement of income from the discontinued construction chemicals business (Million €)

 

Jan. 1–June 30, 2020

Jan. 1–June 30, 2019

Sales revenue

1,187

1,261

Cost of sales

(608)

(696)

Gross profit on sales

579

565

Selling expenses

(356)

(431)

General administrative expenses

(51)

(34)

Research and development expenses

(17)

(16)

Other operating income and expenses

(104)

(25)

Income from companies accounted for using the equity method

EBIT

51

59

Financial result

(2)

(2)

Income before income taxes

49

57

Income taxes

(13)

(15)

Income after income taxes

36

42

of which attributable to noncontrolling interests

3

4

Income after noncontrolling interests

33

38

Earnings per share from discontinued operations

0.04

0.04

The discontinued construction chemicals business accounted for the following amounts in the BASF Group’s statement of cash flows:

Cash flows from the discontinued construction chemicals business (Million €)

 

Jan. 1–June 30, 2020

Jan. 1–Dec. 31, 2019

Cash flows from operating activities

(1)

219

Cash flows from investing activities

(68)

(107)

Cash flows from financing activities

(29)

(18)

Total

(98)

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.

An impairment test was conducted for the disposal group for the pigments business on June 30, 2020. The recoverable amount was determined as of June 30, 2020, by discounting expected cash flows until closing, including income from the sale, at a WACC of 7.98%. This resulted in an impairment in the amount of €66 million, which reduced the goodwill of the disposal group for the pigments business accordingly.