BASF Wins EU Approval for Solvay PA Buy
Following an in-depth investigation into BASF’s proposed purchase of Solvay’s polyamide business, the European Commission has allowed the €1.6 billion transaction to go ahead. In exchange for the green light, the German group agreed to sell assets worth around €450 million.
The remedy package presented by the two market giants and accepted by the EU calls for Solvay’s European production facilities at Belle-Etoile and Valence in France, Gorzow in Poland and Blanes in Spain to be divested to a “single suitable buyer.” BASF said discussions with several interested parties about a sale began in the 2018 fourth quarter.
Along with PA 6.6 base polymer used in both manmade fibre and engineering compounds, and PA -based 3D printing powder, the Solvay business also produces the precursors hexamethylenediamine diamine (HMD), adipic acid and hexamethylenediamine adipate salt.
The sale of Solvay’s entire polyamide business to BASF would have led to a reduction in the number of suitable suppliers and likely price increases in a number of markets, said EU Competition Commissioner Margarethe Vestager. Both companies have a significant position in the integrated value chain, in particular for PA 6.6.
The Commission was concerned in particular about 6.6istarting material adiponitrile (ADN), in which there are only three players. Alongside Solvay the other two are, Invista (the former DuPont business) and Ascend (which emerged from Solutia, formerly part of Monsanto).
BASF’S interest in Solvay’s ADN position was in particular to achieve back integration for its PA polymerization activities. The EU regulatory body feared that the German group could dominate the market, which would be especially worrying is that, due to a global production shortage, the chemical is tight. Adding Solvay’s capacity to its own, it said BASF could have controlled more than a quarter of the European market.
Parallel to the divestments, BASF has committed to create a production joint venture between the merged BASF-Solvay production company at Chalampé, France, the Butachimie jv of Solvay and Invista, and also has pledged to meet the ADN supply requirements of the buyer of the divested assets.
The Commission’s go-ahead coupled with BASF’s remedy package will allow for the creation of a “significant European player “in the market, Vestager said.
With only Chinese approval still out, BASF expects to wrap up the transaction during the first half of 2019. Citing “insiders”, the Reuters news agency said BASF is talking to the companies that had also sought to buy the Solvay business about a possible buy. In this circle it sees South Korea’s SK Innovation, Chinese company KingFa and SK Capital (the private equity owner of Ascend) and German specialty chemicals
Gemany plastics producer Lanxess, itself a major producer of PA, could be interested in beefing up its engineering plastics portfolio, market watchers speculate.
Altogether, the assets up for grabs have estimated core earnings of about €60 million and an expected value including debt of seven to eight times that figure, according to reports.