BASF Puts Its Mark On A Ciba Business

With its $5.1 billion purchase of Swiss specialty chemical maker Ciba last year, BASF acquired one of the world's leaders in plastics additives, both in size and technological strength. Although BASF is a relative newcomer to the high-performance additives that are Ciba's hallmark, company executives say they have much to contribute to their new business to make it even better.

The plastics additives business generated one-third of Ciba's $5.5 billion in sales during 2008. It was the company's second largest business after chemicals for water treatment and paper processing. Other important Ciba businesses included coating ingredients, lubricant additives, oil field and mining chemicals, and personal care materials.

Thus far, BASF's integration of Ciba has focused on cost savings. By 2013, BASF aims to save $650 million annually, largely by eliminating 3,800 jobs. But Markus Kamieth, group vice president for performance chemicals in North America, says the combination will also create value by enhancing Ciba's R&D capabilities and by establishing a platform for launching innovative products.

Many of the plastics additive categories that came with the Ciba acquisition are entirely new to BASF. "Plastics additives was really one of the key components of the rationale for the Ciba acquisition as a whole," Kamieth says. "We really have closed a strategic gap for BASF because BASF was not active on a large scale in polymer additives."

For example, BASF didn't participate at all in antioxidants—materials that prevent oxidation from breaking down polymers during processing or in their final use. Ciba had a world-leading position in phenolic antioxidants and phosphite process stabilizers.

Ciba had a large presence in light stabilizers, whereas BASF had a much more modest role in the area. Ron Babinsky, managing director of Houston-based consulting firm Townsend Solutions, says the BASF light stabilizer business, which focused on hindered amines, was about one-fifth the size of Ciba's unit, which also was the largest in the world.

Kamieth says both companies had strong businesses in plastic colorants. "It was more of a merger of equals in that area," he says. According to Babinsky, BASF's historic additives portfolio included functionalized polyolefin impact modifiers of polyethylene, polypropylene, and engineering thermoplastics, as well as polyolefin waxes used to improve lubricity during plastic processing.

One strong BASF business that is not part of its plastics additives unit is plasticizers. BASF houses plasticizers in its petrochemicals division, Kamieth explains, because they are commoditized materials better left to a unit focused on manufacturing. These are products "not to be compared too much with the plastics additives that we predominantly got from Ciba," he says.

Although BASF has long been manufacturing-centric, it is taking a market-oriented approach to plastics additives. For example, BASF's manufacturing of pigments is handled by its dispersion and pigments division, which serves the coatings industry, but the plastics additives business will be in charge of marketing them to the polymer industry. "Looking at the chemistries that we put together under our plastics additives roof—antioxidants, light stabilizers, and pigments—chemically, they have nothing to do with each other, but the common denominator is that they all serve the plastics industry in a way that requires customer intimacy," Kamieth says.

For BASF, one of the attractions of Ciba's plastics additives business was its focus on polyolefins. By comparison, polyvinyl chloride, styrenic resins, and engineering thermoplastics were secondary sectors for the unit.

According to Babinsky, additives can do more to improve the performance of versatile polyolefins such as polypropylene than of PVC and polystyrene. Because they add more value to polyolefins, they also command bigger profits in that sector. "Ciba was very profitable in plastics additives because of its ability to change functional properties of polyolefins," Babinsky says. "In polyolefin additives, you can add functionality that determines what revenues you have and how profitable you are."

In recent years, polymer growth has been modest in the developed world. But Kamieth notes that BASF can expand its additives business faster than the underlying polymer market through new applications and geographic diversification. "The move of polymer capacities to the Middle East and Asia is well-known," he says. "We will have to align our business along with that to be able to catch up with the increasing demand there."

Kamieth argues that the BASF unit will always have business opportunities because customers demand ever-enhanced properties from polymers. For example, ultraviolet-light stabilization systems can increase the lifetime of polyolefin roofing membranes to as much as 30 years. "The material by itself without an additive package would never have been able to do this," he says. In a newer application, the company offers heat-reflective inorganic pigments for the membranes that can help prevent heat from penetrating the roof.

In addition, Kamieth sees opportunities for the Flamestab line of halogen-free flame retardants that it acquired with Ciba. Three top flame-retardant manufacturers recently pledged to phase out retardants based on decabromodiphenyl ether (C&EN, Jan. 4, page 10), potentially giving alternatives a boost.

Ciba's technological leadership should help BASF pinpoint new markets as well, Babinsky expects. "That is a pretty doggone good asset base that they are buying," he says. "It is pretty tough to beat Ciba's innovation."

For example, in recent years, the company developed antioxidants and light stabilizers for the automotive industry and additives for film. One of the last new products Ciba launched was a line of clarifying agents aimed at giving polypropylene a polyethylene terephthalate (PET)-like clarity in food packaging.

Kamieth argues that the greater size and scope of BASF, a company more than a dozen times bigger than Ciba, will lend scale and stability to future plastics additives R&D efforts. In addition, BASF has additive technologies that it would like to bring to bear on the polymer industry. For example, the company's Joncryl cross-linkers, based on epoxy-functionalized resins, were developed for coatings. The company wants to use them to improve the properties of recycled PET resins and biobased polymers such as polylactic acid. "Now that we have the plastics experts from Ciba and BASF together, we can get a faster and more effective launch for such technologies," he says.

And BASF can add value by subtracting. Last year, when C&EN quizzed Peter R. Huntsman about Huntsman Corp.'s integration of the textile effects business it acquired from Ciba, the chief executive noted that part of the challenge is to whittle down a portfolio containing superfluous products that few customers use.

Kamieth can relate. "You can't be everything to everybody," he says, acknowledging that Ciba and BASF differed somewhat on this issue. BASF, he says, is undertaking a strategic review of its businesses. "As soon as you realize that you are in an area where differentiation is difficult to translate into added value, you better rethink whether this differentiation is part of your value proposition in the end," he says.

Whether by paring down or expanding the portfolio that it now controls, the task at hand for BASF is to build something better. The last thing the company wants to do with a critical piece of its multi-billion-dollar acquisition is lose what made it special.