BASF Taps Finance Chief as Next Deal Beckons for Chemical Maker
BASF SE’s choice of Kurt Bock as the next chief executive officer of the world’s largest chemical maker underscores a focus on acquisitions as the company prepares to clinch its next transaction this month.
Bock, a company veteran of more than two decades, will succeed Juergen Hambrecht in May 2011, BASF said yesterday. Martin Brudermueller, 49, will become his deputy. Bock, 51, was the only candidate presented to the supervisory board, said a member of the panel who voted on the appointment.
“The entire chemical industry is and remains driven by M&A, and somebody who already has a lot of experience with it is certainly well regarded as CEO,” said Lutz Grueten, an analyst at Kepler Capital Markets in Frankfurt. “The times when the classic chemist should lead the company are over.”
Bock and Hambrecht, who assumed their posts in 2003, loosened BASF’s reliance on bulk chemicals with about $16 billion in acquisitions to gain specialty products including catalytic-converters and construction chemicals. BASF is preparing an offer for Cognis GmbH, people with knowledge of the plan said in April, in what is set to be one of Hambrecht’s last deals and the biggest in the industry so far this year.
Bock helped BASF earn a reputation for price discipline with acquisitions, said Jochen Schlachter, a credit analyst at UniCredit in Munich. BASF may bid about 3 billion euros ($3.7 billion) for Cognis, the Monheim, Germany-based maker of ingredients for cosmetics, according to the people, who spoke on condition of anonymity because the talks are private.
BASF is unlikely to announce its bid for Cognis before next week, two other people close to the talks said yesterday.
“BASF made sizeable acquisitions under Bock and built a good track record,” Schlachter said. “They are rather conservative and not known to overpay.”
BASF shares have more than doubled in value since May 2003, when Bock was appointed CFO, until the end of last month, outpacing the 18-member Bloomberg European Chemical Company Index. Under the stewardship of Hambrecht and Bock, annual sales swelled to 50.69 billion euros in 2009 from 33.36 billion euros. Net income rose to 1.41 billion euros from 910 million euros.
Bock worked about five of his past 12 years at BASF in the U.S., with the remainder at the company’s Ludwigshafen headquarters. Besides the finance department, he leads the North American operations as well as the catalysts division. Bock, who is married with three children, still lives in the U.S. Apart from a six-year stint from 1992 at Robert Bosch GmbH, Bock spent his entire career at BASF after joining the company in 1985.
By tapping an insider, BASF deviated from the path chosen by German competitor Bayer AG. The maker of Aspirin in September appointed Marijn Dekkers, the former head of Thermo Fischer Scientific Inc., as CEO. BASF’s supervisory board will consider a successor to Bock early next year, it said today.
“There is no reason for a major overhaul, so there was no reason to bring in an outsider,” said Tim Albrecht, a fund manager who manages 1 billion euros in equities at Frankfurt- based DWS Investment GmbH. “The company has performed very solidly in the past.”
BASF’s is the second executive reshuffle to be announced in a month among the companies listed on the DAX 30 benchmark Index. ThyssenKrupp AG, Germany’s largest steelmaker, on May 4 appointed Siemens AG divisional head Heinrich Hiesinger as CEO to succeed Ekkehard Schulz.
Acquisitions that Bock has helped engineer include catalytic-converter maker Engelhard Corp. for about $5 billion, and Degussa AG construction chemicals business for 2.2 billion euros, both in 2006. The company agreed to pay 3.45 billion Swiss francs ($3 billion) for Ciba Holding AG on Sept. 15, 2008, the same day Lehman Brothers Holdings Inc. filed for bankruptcy.
Assets for disposal include the styrenics business, a low- margin subsidiary that BASF has agreed to exit.
Bock helped steer BASF through the global economic slump that followed Lehman’s demise. BASF reported a loss in that year’s fourth quarter, and reduced its 2009 dividend for the first time in 16 years.
The company also cut capacity at more than 200 production sites, and placed 4,000 employees in Germany on shorter hours. The measures helped return BASF to profit, which reached 1.03 billion in the first quarter of 2010.
Unlike Hambrecht, a trained chemist, Bock has an education in management and finance. He studied business administration in Muenster and Cologne in Germany as well as at Pennsylvania State University. He also holds a doctorate in economics from the University of Bonn, according to BASF’s website.
“I don’t have the deep, scientific knowledge, and a finance person has a bit of different perspective from the science person or a production guy,” Chemical Week cited Bock as saying in an interview last week. Still, the CFO is “heavily involved” in corporate strategy, he told the trade publication.
Founded in 1865 as Badische Anilin & Soda Fabrik to produce coal tar dyes, BASF grew into the world’s largest chemical company, with 103,632 employees globally as of March 31. The company spearheaded the so-called Verbund production principle that aims to integrate operations at major facilities to save resources and energy and cut back on logistics costs.
BASF operates Verbund sites at its Ludwigshafen headquarters, as well as at sites in Antwerp, Belgium, in Geismar, Louisiana, and Freeport, Texas, as well as two Asian Verbund sites in Kuantan, Malaysia, and Nanjing, China.
“Bock will not have to re-invent BASF, but Hambrecht set the bar pretty high,” said Juergen Meyer, who holds 1.8 million BASF shares in his SEB Aktienfonds, the maximum the fund is allowed to own. “It will be a challenge to repeat the success of the past 20 years.”