23 June 2010 13:02 [Source: ICIS news]
LONDON (ICIS news)--The acquisition of Cognis makes BASF a "world leader" in personal- and home-care ingredients and lifts its profile as a supplier of products for nutrition and health, BASF said on Wednesday.
“With Cognis, BASF will further develop its position as the preferred partner for globally leading consumer goods companies - in particular for fast-moving consumer goods," board member John Feldmann said. “We will significantly enlarge our offering to consumer product-related industries.”
The long-awaited acquisition gives BASF further inroads into intermediates for fast-growing consumer chemicals, and distinct formulation and applications know-how.
BASF is paying cash for the consumer chemicals producer, once part of Germany-based Henkel, and will see its debt rise by €2.6bn ($3.2bn) as a result.
CEO Jurgen Hambrecht said, however, that the primary focus for the world’s largest chemical producer would now be on cash flow and de-leveraging.
“To maintain our solid single A-rating is an absolute must,” he said. "This means there will be no further substantial acquisitions in the foreseeable future.”
Ratings agency Moody's, however, said it had put the company's long-term rating on review, with the expectation of a one-notch downgrade.
The chemicals giant expects to complete the acquisition of Cognis by the end of November this year and will integrate the business into its Performance Products segment.
The acquisition will give BASF a market-leading 14% share in ingredients for personal-care products; it will retain a number one place in home-care ingredients and it will move from sixth to third position in the functional nutrition ingredients market, it said.
BASF has agreed to pay €700m for Cognis, but with debt and pension liabilities and other costs the transaction cost is €3.1bn, which is 7.3 times Cognis's adjusted 2009 earnings before interest, tax, depreciation and amortisation (EBITDA) of €422m.
Before extraordinary gains and charges, Cognis's 2009 EBITDA were €322m on sales of €2.6bn.
BASF expects to lever above industry-average growth from the acquired businesses and to reduce earnings cyclicality from the deal, it said.
It sees cost synergies of more than €129m by 2013 but does not expect extensive restructuring of the acquired businesses. The acquisition would be accretive to earnings per share by 2012, it said.
Integration costs will be between €200m and €250m until the end of 2012.
BASF shares were 1.28% higher at €47.34 at 12:36 CET on Wednesday before the Moody's announcement.
($1 = €0.81)
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