Issue Date: June 27, 2016 | Web Date: June 21, 2016
Albemarle sells Chemetall to BASF for $3.2 billion
In a move calculated to strengthen its position in the paints and coatings market, BASF has agreed to purchase Albemarle’s Chemetall metal surface treatment business for $3.2 billion. The deal, which also helps Albemarle reduce debt, is expected to close by the end of this year.
Based in Germany, Chemetall earned $202 million last year on $845 million in sales of products designed to protect metals from corrosion and prepare them for painting. About half of the firm’s sales are in Western Europe, 30% are in North America, and 20% are in Asia.
BASF’s coatings business already has $3.6 billion in annual sales. Wayne T. Smith, the BASF board director responsible for the business, says Chemetall will allow the firm to better serve customers in automotive, aerospace, and coil coatings. The acquisition adds 2,500 employees, 21 production sites in 20 countries, and 10 R&D locations.
Until now, BASF, the world’s largest chemical firm, has stood on the sidelines during the recent spate of deal activity in the chemical sector. Notably, Dow Chemical and DuPont are combining in a $130 billion deal, ChemChina is buying Syngenta for $43 billion, and Bayer is seeking to acquire Monsanto. BASF’s last big deal was in 2010 when it bought personal care chemical maker Cognis for $3.8 billion.
Analyst Laurence Alexander with the investment banking firm Jefferies says the Chemetall acquisition is a strong addition to BASF’s coatings portfolio. He expects the firm will continue to target market-leading specialty chemical add-ons. “Chemetall’s stable business is a good example of how BASF can use acquisitions to reduce cyclical risk in a highly uncertain environment,” he told clients in a research note.
Albemarle CEO Luke Kissam says the Chemetall sale will provide his firm with funds to invest in higher-priority businesses and reduce debt.
Albemarle took on a lot of debt in 2015 when it purchased Rockwood Holdings for $6.2 billion. Chemetall was part of that deal, but Albemarle saw the purchase as more about Rockwood’s lithium chemicals business, which is enjoying growth in the electric vehicle battery sector.
The Baton Rouge, La.-based firm recently sold businesses in mineral flame retardants and metal sulfides that have combined sales of $300 million per year. Last year, it earmarked its fine chemistry services business, with $200 million in annual sales, for divestment, but no movement on that deal has been reported.
Credit rating agency Fitch Ratings says it expects Albemarle to allocate a “meaningful portion” of the proceeds from selling Chemetall to reducing its current debt of $3.6 billion. The agency also expects the sale to free up cash that will allow Albemarle to further invest in its lithium business.
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