Evonik Industries AG’s management rejected a sweetened takeover approach from BASF SE, refusing to open formal negotiations on a deal that would combine two of Germany’s biggest chemical makers and setting up a possible test of how far the larger company is willing to go.
In a regulatory statement on Oct. 30, Evonik’s executive board said it had reviewed BASF’s letter of Oct. 22 expressing interest in a voluntary public takeover offer and decided, based on the information available, not to negotiate. The Essen-based company said it remains focused on its own strategy as an independent business. It left a small opening: the board agreed to a purely informational, confidential exchange in which it will explain its position and BASF can lay out its reasoning.
A second rejection
BASF’s latest approach valued Evonik at about EUR11.18 billion, or roughly $12.5 billion, equal to EUR24 a share. That was up from about EUR22.15 a share in a first proposal that Evonik turned down in September as too low. BASF has pitched the combination as a domestic answer to rising global competition, has said it won’t overpay, and has pledged to honor existing job-protection agreements at Evonik’s German sites. After the rebuff, BASF said it was surprised Evonik would not consider the offer but welcomed the willingness to talk.
People familiar with Evonik’s thinking have said the company remains unconvinced by the industrial logic of a merger. Evonik makes specialty plastics, animal-feed additives and ingredients for coatings and household products, while BASF’s businesses span engineering plastics, superabsorbent polymers, vitamins and basic industrial chemicals. Evonik generated sales of EUR14.1 billion and adjusted earnings before interest, taxes, depreciation and amortization of EUR1.9 billion last year, and employs about 31,000 people.
Evonik’s own shopping list
The standoff is complicated by Evonik’s own deal ambitions. The company has been studying a purchase of Ashland Inc., the U.S. maker of personal-care and specialty ingredients, and has hired advisers to look at targets, according to people familiar with the matter. Those people have said the review began before BASF made its approach. Ashland has drawn interest from several private-equity firms since it began exploring options in August.
BASF now has to decide whether to raise its price, go directly to Evonik shareholders with a public offer or step back. Any public bid would face scrutiny from labor representatives, who carry significant weight in German corporate deals.
