Story
BASF Submits Takeover Proposal for Rival Evonik, FT Reports
Summary
German chemical giant BASF has reportedly approached rival Evonik Industries with a takeover proposal, a move aimed at consolidating the struggling European sector, according to the Financial Times.
Chemicals group BASF SE has submitted a takeover proposal to its German rival Evonik Industries AG, the Financial Times reported on Wednesday. The move represents a significant push for consolidation within a European chemical sector grappling with high costs and weak demand.
According to the report, the Ludwigshafen-based company approached both Evonik's management and its largest shareholder, the RAG-Stiftung foundation, to present the potential combination. Sources cited in the report cautioned that the discussions are preliminary and may not result in a definitive agreement.
Strategic Rationale and Scale
A potential merger would create a European industrial heavyweight with combined annual revenues of approximately €74 billion. The strategic logic behind the proposal is to build scale to better compete with state-backed Chinese competitors and American chemical majors like Dow, particularly amid global overcapacity.
The deal would be a major transaction for the sector. Evonik has a market capitalization of €8.4 billion and an enterprise value of around €12 billion, including debt. BASF, the world's largest chemical producer, has a market value of roughly €47 billion.
Market Reaction and Hurdles
AdThe report prompted an immediate reaction in Frankfurt trading, with shares in Evonik (ETR:EVKn) surging more than 7%, while BASF's stock (ETR:BASFn) declined nearly 2%. The success of any potential deal hinges on securing the approval of the RAG-Stiftung foundation, which holds a controlling 44% stake in Evonik.
While the combination could face antitrust scrutiny, European regulators have recently shown more willingness to approve regional consolidation to create globally competitive champions. The proposal aligns with BASF CEO Markus Kamieth's strategy of streamlining operations and shifting the company's portfolio toward higher-margin products.
Industry Headwinds
The takeover approach comes as European chemical manufacturers face significant macroeconomic challenges, including volatile energy prices and sluggish demand. In response, both companies have recently implemented aggressive cost-cutting programs, with Evonik announcing plans to eliminate over 3,200 jobs as part of a restructuring effort.
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