Evonik set to reject BASF takeover bid as valuation gap clouds Germany chemicals tie-up

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Evonik rejects BASF takeover bid

Highlights

Evonik plans to reject BASF's revised €24 per share takeover bid, citing undervaluation, despite the offer representing a nearly 40% premium to pre-September prices.
Evonik favors a standalone strategy involving acquisitions like bidding for Ashland and implementing job cuts and plant closures to strengthen its business.
Support from RAG-Stiftung and political figures, especially with the North Rhine-Westphalia state election in April, will be crucial for any BASF-Evonik merger approval.

Offer terms and Evonik's stance

As first reported by the Financial Times, Evonik is planning to reject BASF's sweetened offer of €24 per share because it considers the bid too low and believes it undervalues the specialty chemicals group.

The Essen-based company could issue a statement in the coming days setting out that position, according to people familiar with the matter. At the same time, Evonik may leave open the possibility of future discussions if BASF improves its proposal further and provides more clarity on the strategic merits of a tie-up.

BASF chief executive Markus Kamieth said last week that the Ludwigshafen-based company would maintain Evonik's existing job guarantees through 2032 and argued that a combination would strengthen both businesses as competition rises from Asian and Middle Eastern rivals. He also said BASF would not pursue a merger "at any price".

The €24-a-share proposal represents almost a 40% premium to Evonik's share price before takeover interest emerged in September. BASF's initial offer of €22.15 per share was rejected by Evonik that month.

Strategic options and political considerations

Evonik currently prefers to continue with its standalone strategy, which includes potential acquisitions as well as previously announced job cuts and plant closures aimed at strengthening the business. The company is also among the bidders for U.S. specialty chemicals peer Ashland, which is exploring a sale after pressure from an activist investor.

That process carries risks, including competition from other suitors and legacy litigation exposure tied to asbestos claims, according to the people. Evonik declined to comment, while BASF and Ashland were not immediately available for comment.

Any BASF takeover of Evonik also depends on support from the smaller company's biggest shareholder, the RAG-Stiftung foundation. The foundation's board of trustees includes North Rhine-Westphalia premier Hendrik Wüst, and with a state election due in April, any decision is taking on a stronger political dimension.

Shareholders, executives and politicians are weighing the benefits of creating a Germany-based chemicals champion with combined annual revenue of €74 billion against the risks of a complicated merger and possible cost reductions.

Activist investors’ push for a sale of Big Yellow highlighted how takeover and break-up speculation can intensify when a listed company is seen as undervalued. Our earlier article noted that two hedge funds built sizeable stakes, urged the board to explore strategic options including a sale, and pointed to broader consolidation trends despite the company insisting past approaches did not reflect its full potential.

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