BASF explores Evonik takeover as Europe chemicals consolidation pressure grows

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BASF explores Evonik takeover

Highlights

BASF is in advanced talks with Evonik and RAG-Stiftung about a potential merger, valuing Evonik at an enterprise value of about 12 billion euros.
Evonik shares rose up to 10.6 per cent and BASF shares fell 2.7 per cent following news of the possible merger aimed at consolidating Europe's fragmented chemicals industry.
The combined BASF-Evonik entity would have 74 billion euros in annual revenue and could achieve significant synergies, though regulatory scrutiny is expected amid a more supportive Brussels policy stance.

Takeover talks and deal structure

As first reported by the Financial Times, BASF has approached Evonik and its largest shareholder, RAG-Stiftung, about a possible merger, according to people familiar with the matter. The Ludwigshafen-based group has also been speaking with banks about a potential deal since earlier this year and continues to work on the proposal, although the talks may still fail to produce an agreement.

Any transaction would be significant in scale. Evonik has a market capitalisation of about 8.4 billion euros, while its enterprise value including net debt is about 12 billion euros, and shareholders would be expected to seek a meaningful takeover premium.

People familiar with the business say Evonik’s shareholders and executives would need to be convinced that a combination with BASF offers a strong strategic fit as well as acceptable terms. The stance of RAG-Stiftung, which holds 44 per cent of Evonik, is likely to be decisive in whether a deal can proceed.

BASF, Evonik and RAG-Stiftung declined to comment. Dealreporter also wrote this week that BASF had explored a possible merger with Evonik this year.

Industry impact and strategic rationale

A takeover would mark a major step by BASF chief executive Markus Kamieth to consolidate Europe’s fragmented chemicals industry, which is under pressure from weak demand, global overcapacity and higher input costs. Investors reacted quickly, with Evonik shares rising as much as 10.6 per cent on Friday, while BASF shares fell 2.7 per cent.

A combined company would create a larger German chemicals champion with broader reach across speciality and industrial products. Together, BASF and Evonik generated 74 billion euros in revenue last year, and the merger could offer room for cost reductions in overlapping markets such as Germany while supporting growth in Asia and the U.S.

Regulatory scrutiny would be likely, but the political backdrop in Brussels has become more supportive of larger European industrial champions. Evonik operates in more than 100 countries and employs about 31,000 people, producing additives for paints and mattress foam, polymers for automotive and aerospace uses, and amino acids for animal feed.

Evonik this week announced plans to cut more than 3,200 jobs, mostly in Germany. The company is led by interim chief executive Claus Rettig after Christian Kullmann stepped aside in August due to illness, and it is closing smaller plants, selling non-core businesses and trying to expand in Asia and America.

BASF has also been reshaping its portfolio. In July it raised its earnings outlook after increasing product prices, completed the 7.7 billion euro sale of a majority stake in its automotive coatings business to Carlyle, and this month hired banks for a planned mid-2027 listing of its agricultural solutions unit.

Germany’s biggest chemicals groups are raising prices this year as they contend with surging energy costs linked to conflict in the Middle East. Some producers, however, are also getting a short-term competitive benefit over Asian rivals that depend more heavily on Gulf raw materials such as naphtha and methanol.

In our earlier coverage, we looked at reports that BASF had approached Evonik and its largest shareholder, the RAG Foundation, to discuss a possible merger and had been sounding out banks about a deal. We also noted the immediate market reaction, with Evonik shares jumping on expectations of strategic value, while both companies refrained from confirming any formal approach—leaving the status of the talks uncertain.

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