BASF's Cognis Acquisition Creates Preeminent Personal-Care Portfolio
This article was originally published in The Rose Sheet
Executive Summary
BASF's June 23 acquisition of Cognis will make it the global leader in personal-care ingredients and the only supplier "capable of offering a full range of ingredients" in the segment, the firm says
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BASF's June 23 acquisition of Cognis will make it the global leader in personal-care ingredients and the only supplier "capable of offering a full range of ingredients" in the segment, the firm says. After the deal closes - expected in November - BASF will command 14 percent of the market, according to a Deutsche Bank analyst report. BASF will pay €3.1 billion ($3.8 billion) to Permira Funds, Goldman Sachs Capital Partners and SV Life Sciences for fellow German specialty chemicals supplier Cognis. According to the announcement, €700 million ($862 million) of the deal will be in cash and the rest will be financed. Cognis - the subject of takeover speculation for months - was expected to be bought for between €2.7 billion and €3.5 billion ($3.3 billion and $4.3 billion) (1 (Also see "Cognis Acquisition Would Reinforce BASF's Personal-Care Portfolio" - HBW Insight, 7 Jun, 2010.)). The purchase is "supportive to [BASF's] long-term aim of developing less cyclical earnings and cash flow," Deutsche Bank analyst Tim Jones observed in a note to investors. The deal also will improve BASF's position as a key supplier, providing the firm an opportunity to leverage pricing and deliver greater earnings, he suggested. Moreover, adding Cognis's personal-care and home ingredients to its portfolio "reduces BASF's industrial focus," providing positive synergies and targeted cost savings of an estimated €130 million by 2013, Societe Generale analyst Peter Clark wrote in a note to investors. During a June 23 conference call, Juergen Hambrecht, BASF's chairman of the board of executive directors, offered his perspective: "In short, BASF plus Cognis means growth, value and sustainability for the benefit of all stakeholders of both companies." Cognis Care Chemicals Enticed Suitor In 2009, 56 percent of Cognis' sales, or €1.46 billion ($1.8 billion), was derived from its Care Chemicals division, which covers the personal-care and home-care markets. The division's success to date is due to "its strong brands, its innovative products, its leading position in products based on renewable materials, its superior formulation technology and a strong partnership with customers," according to BASF's John Feldmann, a member of its board of executive directors. The market for Care Chemicals is expected to grow at a rate of 4 percent annually, the exec noted. Growth drivers for the segment include rising wealth worldwide, emerging markets, increased consumer awareness of environmental issues and the swelling and aging world population, he said. Together, BASF and Cognis will offer a "fuller portfolio" of products and "continue close cooperation with customers" ranging from large international firms to regional companies, particularly regional firms in Asia. BASF was drawn to Cognis' innovations at the personal-care level, including its anti-aging actives for skin-care products and cationic polymers for hair-care products, Feldmann said. All Cognis divisions will be integrated into BASF's Performance Products segment, which posted sales of €9.4 billion ($11.6 billion) in fiscal 2009. Overall, Cognis booked €2.6 billion in 2009 sales. Cognis CEO Antonia Trius said in a release he is "convinced that there are excellent opportunities through combining the strengths" of the two companies. Cognis was created in 1999 and sold by consumer products firm Henkel in 2001 for $2.2 billion (2 'The Rose Sheet' Dec. 3, 2001, In Brief). - Lauren Nardella ( 3 [email protected] ) |