European Commission gives go ahead for BASF’s acquisition of Cognis

By Simon Pitman

- Last updated on GMT

Related tags: European commission, European union, BASF, Cognis

Five months after announcing its intention to buy up specialist chemicals provider Cognis, BASF has been given the all clear for the acquisition from the European Commission.

The European Commission approved the acquisition subject to the divestiture of certain Cognis businesses that were deemed to give BASF an unfair advantage in the market, but none of the operations are directly concerned with the personal care market.

The divestitures include the company’s operations at its Hythe production facility in England, including its Hydroxy methyacrylates and multifunctional methylacrylates operations, together with its plants for the manufacture of polyalkylene gyclols (PAG) and PAG-based lubricants.

Licensing agreement for PAG manufacture

The company says it will retain a part of the PAG and PAG-based lubricants business at the Hythe facility through a toll manufacturing agreement, which will allow BASF to grant a license to manufacture the products to the purchaser of the facilities.

The divestitures account for approximately €100m of the Cognis annual revenue - less than 3 per cent of the company’s annual revenue, which in 2009 was €2.6bn.

The transaction has now been given approval by all competition and regulatory bodies concerned with the transaction on a global basis, including approval by the Chinese authorities.

Transaction to be closed by mid-December

As a result, the final closure of the transaction is expected to take place in mid-December, which means the business will be integrated into the BASF for the company’s 2011 financial year.

BASF announced its intentions to buy Cognis at the end of June, when it stated that it would acquire the business for €3.1bn, subject to approval by regulation and competition authorities.

The acquisition aims to give BASF a leading position in the higher margins personal care and home care markets, as well as boosting its position in human nutritional care, ultimately generating growth above that of the industry average.

Good position for further acquisitions

Currently Cognis is divided into three business segments – care chemicals, which represents the personal care market; together with nutrition & health and functional products.

This more dominant position in the personal care field is also expected to put the company in a good position for further expansion within the market.

Though the deal is not expected to be financially positive until 2012, the benefits to the cosmetic arm of the business are expected to be felt within the first six to 12 months of it going ahead.

Related topics: Business & Financial

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