3. Acquisitions and Divestitures

Acquisitions

In 2021, BASF acquired the following activity:

• Since August 31, 2021, BASF and Shanshan, a lithium-ion battery materials provider in China, have held shares in BASF Shanshan Battery Materials Co., Ltd. The company is majority-owned by BASF (BASF 51%; Shanshan 49%). It already occupies a very strong position in the value chain for battery materials including raw materials, precursors for cathode active materials, cathode active materials and battery recycling. It focuses primarily on the electric vehicle market as well as the consumer electronics and energy storage segments. Through this investment, BASF is further strengthening its position in Asia to create an integrated global supply chain for battery materials for customers in China and worldwide. The investment strengthens the Catalysts division. The transaction includes four companies and approximately 1,600 employees. One of the companies is classified as an investment accounted for using the equity method, but for reasons of materiality, was consolidated in BASF’s financial statements at amortized cost. The purchase price was €616 million and was cash-effective in full. A separate transaction valued at €36 million was connected to the purchase in accordance with IFRS 3.51 and was reported under other receivables. It contains a compensation component which is coupled with employees remaining at BASF Shanshan Battery Materials Co., Ltd. It affects a period of one to two years and will be disbursed in two tranches. Goodwill of €254 million resulted in particular from sales and cost synergies. The businesses acquired accounted for €354 million in sales revenue and –€36 million in income from operations in the 2021 fiscal year. Including the businesses and assets of the BASF Shanshan companies in BASF’s Consolidated Financial Statements since January 1, 2021, would have resulted in a sales revenue contribution of €821 million and income from operations of €13 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, 2021, and are not suitable for forecasting future developments or events. The goodwill is not tax deductible.

The following table shows the fair values for the assets and liabilities of the BASF Shanshan companies, which were used on a preliminary basis until a complete independent valuation is carried out. 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. If further facts and circumstances become known within the 12-month valuation period pursuant to IFRS 3, the purchase price allocation will be recalculated accordingly.

The gross amounts of contractual trade accounts receivable were €290 million, of which €52 million is expected to be uncollectible. The gross amounts of Other receivables were €160 million.

• Furthermore, BASF completed the purchase of 49.5% of Vattenfall’s Hollandse Kust Zuid wind farm on September 1, 2021. The transaction is not being reported as an acquisition because the acquired assets do not constitute a business in accordance with IFRS 3.2b, so it is not within the IFRS 3 scope of application. The transaction is therefore not included in the table below.

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 broadened BASF’s polyamide capabilities with innovative products. It also enhanced the company’s access to growth markets in Asia as well as in North and South America. Through backward integration into the key raw material adiponitrile (ADN), BASF was integrated along the entire polyamide 6.6 value chain and was able to 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 in 2020. The remaining purchase price should be paid in 2022. 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. Goodwill of €20 million resulted in particular from sales synergies. The majority of total goodwill was not tax deductible.

The following overview shows the effects of acquisitions in 2021 and 2020 on the Consolidated Financial Statements. When acquisitions resulted in the transfer of assets or the assumption of additional liabilities, the effects were shown as net amounts.

Divestitures

In 2021, BASF sold the following activities:

• On May 31, 2021, BASF completed the sale of its production site in Kankakee, Illinois, to a subsidiary of One Rock Capital Partners, LLC. The transaction also included the vegetable-oil-based sterols and natural vitamin E business as well as the anionic surfactants and esters produced at the Kankakee site. The purchase price was €177 million. The transaction affected the Nutrition & Health and Care Chemicals divisions.
• Following the fulfillment of clearance conditions, BASF closed the divestiture of its global pigments business to DIC, Tokyo, Japan, on June 30, 2021. The business’ assets and liabilities have been reported as a disposal group since the business transfer agreement was signed in August 2019. The purchase price on a cash and debt-free basis was €1.15 billion. The transaction affected approximately 2,500 employees in the Dispersions & Pigments division. The division was renamed Dispersions & Resins following the transaction closing. The disposal group of the pigments business was derecognized when BASF’s global pigments business was sold to DIC, Tokyo, Japan, on June 30, 2021. The calculation of the disposal loss on the global pigments business is presented in the following table:

• On November 9, 2021, BASF and Clayton, Dubilier & Rice sold their shares in Solenis to Platinum Equity, Beverly Hills, California. With over 5,200 employees, Solenis serves customers in water-intensive industries by helping them solve complex water treatment and process improvement challenges. BASF held a 49% share in Solenis after having transferred its wet-end paper and water chemicals business to the company in February 2019. This was accounted for using the equity method. The remaining 51% of the shares were held by funds managed by Clayton, Dubilier & Rice, and by Solenis management. The purchase price allocated to BASF was €1.1 billion. The investment was classified as non-integral. Its earnings and the gain on the disposal in the amount of €589 million were reported under net income from shareholdings.
• On November 30, 2021, BASF completed the sale of the precision microchemicals business to Entegris, Billerica, Massachusetts. The transaction included fixed assets and inventories; the purchase price was €78 million. The precision microchemicals business was part of the Surface Treatment business unit of BASF’s Coatings division, operating under the Chemetall brand.

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. Purchase price adjustments were reported in income from discontinued operations in the amount of €36 million after taxes in 2021.

The following overview shows the effects of the divestitures in 2021 and 2020 on the Consolidated Financial Statements. The sales line item showed the year-on-year decline resulting from divestitures. The impact on equity related mainly to gains and losses from divestitures.

Agreed transactions and groups of assets and liabilities held for sale (disposal groups)

• On November 18, 2021, BASF and KaMin LLC./CADAM S.A. (KaMin) signed an agreement to sell BASF’s kaolin minerals business to KaMin, a global performance minerals company headquartered in Macon, Georgia. Currently, the kaolin minerals business is part of BASF’s Performance Chemicals division. Pending approval by the relevant antitrust authorities, the transaction is expected to close in the second half of 2022. The kaolin minerals business has approximately 440 employees in North America, Europe and Asia. The divestiture comprises the production hub with sites in Daveyville, Toddville, Edgar, Gordon and related mines, reserves and mills in Toomsboro and Sandersville, Georgia. The refinery catalysts operations located at the same site are not part of the divestiture. With the agreement on the sale of the kaolin minerals business to KaMin, the affected assets and liabilities were reclassified to a disposal group, and an impairment test was performed as of December 31, 2021. In accordance with IFRS 5, the fair value less expected disposal costs was used as the recoverable amount and compared with the carrying amount. This resulted in the need for impairment in the amount of €9 million as of December 31, 2021, which was allocated to the goodwill of the disposal group for the kaolin minerals business.
• On December 6, 2021, BASF and Allianz Capital Partners, acting as party to the contract on behalf of Allianz Insurance Companies (Allianz), agreed to the purchase by Allianz of 25.2% of the investment in the Hollandse Kust Zuid (HKZ) offshore wind farm. This follows a transaction between Vattenfall and BASF under which BASF acquired 49.5% of HKZ from Vattenfall on September 1, 2021. The transaction is expected to close in the first quarter of 2022, subject to the approval of the relevant antitrust authorities. The assets and liabilities were reclassified to a disposal group upon agreement to the investment by Allianz.
• On December 28, 2021, BASF reached an agreement with Clariant Corporation, Louisville, Kentucky, to sell its production site in Quincy, Florida, and the associated attapulgite business in the Dispersion & Resins division. The Quincy site employs around 75 employees and manufactures clay-based mineral products used in a variety of industrial applications. The purchase price amounts to $60 million. The transaction is expected to close in the summer of 2022, subject to the approval of the relevant antitrust authorities.

Other comprehensive income as of December 31, 2021, included €52 million, which resulted from the change in the fair value of physical power purchase agreements (PPAs) and is fully attributable to the wind farm investment disposal group.

The values of the disposal groups are presented in the following table.