BASF SE is preparing a bid for Cognis GmbH that may value the closely held chemical maker at about ¤3 billion ($4 billion), according to two people with knowledge of the situation. BASF, the world’s biggest chemical producer, may make an offer as early as next week, said the people, who declined to be identified because the plans are private. BASF spokeswoman Jennifer Moore-Braun declined to comment. A US bidder is also interested in buying Cognis, which is owned by Goldman Sachs Group Inc and Permira Advisers Ltd, one of the people said. Lubrizol Corp and DuPont Co are among companies that might want to make a bid, analysts said.
Cognis is drawing bidders with its ingredients for body lotions, cleaning products and shampoos, products that are more resistant to economic cycles than those directly derived from oil and gas.
“Cognis is strong in home and personal-care chemicals based on natural raw materials,” said Andreas Heine, an analyst at UniCredit SpA. “Whoever owns Cognis, owns the global market leader. It would be the right addition for BASF. We believe Cognis will be sold this year.”
Buying Cognis would help BASF Chief Executive Officer Juergen Hambrecht curb his company’s reliance on plastics and chemicals that Middle East competitors produce more cheaply. A former Henkel AG unit, Cognis was sold to the buyout firms in 2001.
Among the potential US bidders, Lubrizol’s “balance sheet is in a very strong position,” said Dmitry Silversteyn, an Independence, Ohio-based analyst at Longbow Research. “They have articulated a desire to grow in personal care.”
The largest maker of thickeners for personal-care products such as lotion and shampoo, Lubrizol has a market value of $6.58 billion, $1.9 billion of debt and nearly $1 billion of cash.
Lubrizol is targeting acquisitions of as much as $500 million, although “given the nature of acquisitions, there might be some that are bigger,” Mark Sutherland, a spokesman for the Wickliffe, Ohio-based company, said April 9. The company wants to maintain its investment-grade credit rating with any deal, he said. Standard & Poor’s Ratings Services rates Lubrizol BBB+, three levels above junk.
Lubrizol declined to comment on whether it’s interested in buying Cognis. The company could make a $3 billion acquisition and maintain investment-grade credit, Deutsche Bank AG analysts wrote in a March 16 report.
An acquisition of Cognis would be a multiple of the largest previous Lubrizol deal, the 2004 purchase of Noveon International Inc. for about $1.84 billion in cash and assumed debt, which gave the company personal-care product ingredients. Bloomberg records show Lubrizol completed 16 acquisitions dating to 1998.
Cognis may also be a good fit for DuPont, the third-biggest US chemical maker, Laurence Alexander, a New York-based analyst at Jefferies & Co, said April 9. Lori Captain, a spokeswoman for Wilmington, Delaware-based DuPont, declined to comment.
The owners of Cognis are reviewing their options and will decide in coming weeks whether to sell the company or pursue an initial public offering, another person said. Venture capital company SV Life Sciences also owns a stake in Cognis.
Cognis’s equity value compared with peers including British competitor Croda International Plc limits the amount it may generate in an IPO, making a sale to a strategic investor more likely, according to credit analyst Jochen Schlachter of UniCredit SpA in Munich.
A purchase would be BASF’s biggest since its takeover of Ciba Holding AG for $5 billion last year. Hambrecht said in February he would avoid any big acquisitions until the integration of Ciba was completed. He said in January that BASF has made more progress toward a savings goal from the merger.
Hambrecht is streamlining the company to move out of lower- margin businesses, and the company is looking for a buyer for its styrene operations. Dow Chemical Co. agreed last month to sell its Styron unit, the world’s biggest producer of polystyrene plastic, to Bain Capital Partners for about $1.63 billion to pay down debt and focus on higher-value materials.
Dusseldorf-based Cognis, which employs about 5,600 people, has reduced its workforce by 39 per cent since the end of 2001. It was sold by Henkel for ¤2.5 billion after the maker of Loctite glues and Persil detergent chose to focus on consumer and industrial products.
Cognis is in the process of creating a prospectus for a share sale should its owners decide to list the company, Chief Executive Officer Antonio Trius said on March 24. He forecast rising sales and operating profit this year.
The German company posted 2009 profit of ¤25 million, following a loss of ¤49 million in 2008. Net debt stood at ¤1.87 billion as of December 31. Sales fell 14 per cent to ¤2.58 billion as earnings before interest and taxes rose 3 per cent to ¤195 million.
