BASF expects to generate EBIT of €275m from Cognis deal

Plans to sell Cognis production plant in Hythe, UK

German chemicals company BASF expects to achieve additional earnings before interest and taxes (EBIT) of €275m from the integration of Cognis.

This includes growth synergy targets to generate additional EBIT of b€135m by 2015 and cost synergies of around €140m, which will be achieved by the end of 2013.

BASF said in order to achieve these growth targets it would create 230 jobs worldwide, mainly in the Care Chemicals division. At the same time, 680 jobs will go owing to duplications in functional and administrative roles and as part of the company’s plans to improve efficiency by the end of 2012.

By the end of 2013, BASF expects one-time integration costs of around €290m, excluding an inventory step-up of €120m in 2010/2011.

The integration will be accretive as of 2012, less than two years after the acquisition, the company said.

According to John Feldmann, member of BASF’s executive board, who is responsible for BASF’s Performance Products segment and the Cognis integration, the acquisition will strengthen BASF’s business in the growth markets of personal and home care, nutrition and health, coating additives synlubes and mining chemicals.

‘The businesses complement each other excellently and allow us to offer our customers a comprehensive portfolio of products and solutions from both renewable and petro-based chemistry,’ he said.

BASF plans to maintain 26 of the 28 Cognis production sites. The company will sell the Cognis production plan in Hythe, UK and is evaluating future strategic options for Tromsoe, Norway.

Of Cognis’ 37 non-production sites, 26 will be consolidated with existing BASF sites or exited, nine will remain and two are still under review.

BASF’s European Regional Business Unit (RBU) Personal Care will be located at Cognis’ former company headquarters in Monheim, Germany.

The Düsseldorf-Holthausen production site, which was Cognis’ largest, will be one of the Care Chemicals division’s key sites within its global production network, the centre for global development in Personal Care and an important platform focusing on renewable-based ingredients as part of BASF’s corporate research.

‘We will continue to focus on our customers’ needs and put the highest priority on ensuring that there are no business disruptions of any kind during the integration process,’ said Feldmann.

BASF announced its plans to acquire Cognis in June 2010 and completed the acquisition in December 2010. The equity purchase price was €700m. Including net financial debt and pension obligations, the enterprise value of the transaction was €3.1bn.

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