BASF is in a public row with the investment company LetterOne Holdings over the direction of their oil and gas joint venture, Wintershall Dea. BASF wants to divest its 73% stake in the firm with an initial public offering (IPO) of stock. LetterOne maintains that the timing for such a move is poor.
The two companies formed Wintershall Dea in 2019 through the merger of BASF’s Wintershall unit and LetterOne’s Dea business. The firm produces more than 600,000 barrels of hydrocarbons per day and posted sales of $4.4 billion in 2020.
Wintershall Dea operates mostly in northern Europe and Russia. It owns a 16% stake in the Nord Stream natural gas pipeline, which runs under the Baltic Sea from Russia to Germany. It is also helping to finance the controversial Nord Stream 2 pipeline currently under construction.
An IPO would continue BASF’s trimming of unwanted businesses. It sold its construction chemical unit to the private equity firm Lone Star in 2020 for $3.6 billion. It sold its pigment business last year to Japan’s DIC. And Platinum Equity purchased the water treatment chemical firm Solenis from BASF and Clayton, Dubilier & Rice in November for $5.3 billion.
LetterOne says the time is not right for a Wintershall Dea IPO. “Market sentiment remains a challenge, including towards Russian-exposed assets,” the investment company says in a statement.
Russia faces potential economic sanctions should it invade Ukraine.
Moreover, LetterOne says Wintershall Dea should focus on long-term investments. Becoming a public company would create pressure to focus on short-term cash flow and dividends.
“We remain fully committed to divest our share in Wintershall Dea and we continue to consider an IPO as the best way to market our share,” a BASF spokesperson says in an email.