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BASF mulls a bid for DuPont

But analysts think breaking up Dow-DuPont deal is too pricey

by Alexander H. Tullo
March 8, 2016 | APPEARED IN VOLUME 94, ISSUE 11

Read C&EN’s full coverage of the Dow-DuPont merger:
ACS members can also watch an archived version of a webinar with C&EN’s Alex Tullo on the future of R&D at DuPont.

Analysts doubt BASF’s purported interest in DuPont will yield a bid that would scuttle the merger that Dow Chemical and DuPont shook hands on in December.

According to a Bloomberg report published on Friday, March 4, citing “people with knowledge of the matter,” the German chemical giant is working with investment banks to craft a potential offer for DuPont.

Credit: BASF
BASF may be working on a deal to get its hands on DuPont’s agriculture business.
Credit: BASF
BASF may be working on a deal to get its hands on DuPont’s agriculture business.

Dow and DuPont announced their $130 billion merger on Dec. 11. The companies plan to combine later this year, shed about $3 billion in costs, and then split into three separate firms involved in agriculture, polymers, and specialty chemicals.

Forming a seed and crop protection firm to leapfrog Monsanto was one of the motivations of the deal. Already, other companies in the sector are following suit. Last month,ChemChina agreed to purchase Syngenta for $43 billion. Syngenta fended off a hostile bid from Monsanto last year.

BASF’s agriculture unit is smaller than Dow’s or DuPont’s, and unlike its rivals, BASF has no significant seed business.

BASF may have been in the hunt for DuPont’s agriculture business since last fall. According to a prospectus filed for the Dow-DuPont merger, an unnamed company, thought by observers to be BASF, made overtures to DuPont officials about a possible cash acquisition of the firm’s agrochemicals unit or a wider transaction. But negotiations were never initiated.

Analysts think a bid to derail the Dow-DuPont deal is a long shot. “A rival spoiler bid still seems unlikely in our view,” Jefferies analyst Laurence Alexander wrote to clients.

“We just don’t see it,” wrote Sanford C. Bernstein stock analysts Jeremy Redenius and Jonas Oxgaard.

They argue that a BASF-DuPont deal wouldn’t yield nearly the cost synergies of the Dow-DuPont combination. DuPont would be forced to pay a $1.9 billion breakup fee to Dow. And it would be hard for BASF to swallow the $72 billion it would have to pay to entice DuPont to renege on its commitment to Dow.

A more attractive option for BASF in agriculture, the Bernstein analysts say, is a joint venture with, or even a purchase of, Monsanto. The two companies already have a technical collaboration.



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