BASF (Ludwigshafen / Germany; www.basf.com) has made a CHF 6.1 bn (EUR 3.8 bn) cash takeover bid for Swiss speciality chemicals producer Ciba (Basel / Switzerland; www.cibasc.com). The offer, agreed on 14 September, will officially begin on 1 October 2008. It represents a 32% premium over the closing share price on 12 September 2008, BASF chairman Jürgen Hambrecht said at a press conference in Zurich / Switzerland to announce the plans. The success of the deal rests on its being accepted by two-thirds of Ciba’s shareholders.

Hambrecht stressed that the two chemical groups’ portfolios are largely complementary. He remarked that Ciba’s position as “an undisputed global leader” in plastics additives is especially interesting to BASF as a polymer producer – in particular the high-value-added light stabilisers and antioxidants businesses, which represent a world market of EUR 4 bn with growth perspectives of 4% annually. The Ciba business has an EBITDA margin of 19%, excluding corporate costs. Hambrecht said its integration into BASF would close “strategic gaps” and enable his group to “offer a complete portfolio.” He added that Ciba’s packaging activities also would expand BASF’s product range.

BASF plans to integrate all of the Swiss group’s three segments, which in addition to "Plastics Additives" include "Coating Effects" and "Water & Paper Treatment," into its Performance Products segment, with sales of nearly EUR 2.9 bn in 2007. Hambrecht said one of the BASF divisions would be relocated to Basel and that the former Ciba headquarters would remain an important R&D centre. The acquisition, projected to be accretive to BASF’s earnings in the second year, would lift the German group’s positions in all three business areas to “number one or two globally.”

For 2007, Ciba, which is currently undergoing restructuring, reported sales of CHF 6.5 bn and a pre-restructuring EBITDA of CHF 909m, along with income from continuing operations of CHF 220m. In the first half of 2008, sales declined 7% to CHF 3.1 bn, with operating profit down 41% to CHF 161m. The plastics additives business saw its operating profit decline 48% – see Plasteurope.com of 26.08.2008. The group employs 13,000 people at 60 production sites worldwide.

At the press conference, Armin Meyer, formerly CEO of Ciba and now head of the supervisory board, explained the “industrial logic” behind the sale. He said Ciba is being battered by accelerating costs as well as the consolidation in its markets, both upstream and downstream. “Some of our raw materials suppliers as well as our customers are larger than we are by a factor of ten,” he said. With a thinly disguised reference to ailing compatriot Clariant (Muttenz; www.clariant.com), which recently replaced its CEO, Meyer noted that other speciality chemicals producers are facing the same pressures.

Through its “speedy integration” into BASF, including a “very consistent restructuring process,” Meyer said Ciba “will re-establish earnings power.” Hambrecht also alluded to the need for more restructuring. However, he declined to comment on possible synergies or workforce reductions, saying these matters had not yet been discussed. Analysts are questioning the timing of BASF’s move. While Hambrecht acknowledged having watched Ciba with interest “for some time,” takeover talks have been in progress for just over a month. Speculation about an imminent Ciba takeover has been mounting, and the revival of merger plans with Clariant also mooted. Asked at the conference call whether Ciba had received other offers, Meyer said it had not.