BASF Feels No Pressure as Rivals Plan $170 Billion of Deals

  • Chemical maker focused on operations, Asia chief Gandhi says
  • BASF’s strategy under CEO Bock has been consistent, he says

BASF SE executive Sanjeev Gandhi signaled the world’s biggest chemicals company may sit out a merger frenzy gripping the industry even as rivals pursue more than $170 billion worth of deals that could lead to a complete remodeling of the global landscape.

“We feel very comfortable right now and we watch with a lot of interest what happens in the industry,” the executive board member responsible for Asia said in an interview Monday in Ludwigshafen, Germany, where the conglomerate is based. “We don’t see any pressure.”

Sanjeev Gandhi

Source: BASF SE

Gandhi was speaking just hours after German competitor Bayer AG offered $62 billion to buy Monsanto Co., a bid subsequently rejected by the U.S. seed maker as too low. The two companies haven’t closed the door on a possible agreement. Their exchanges this week came on the heels of China National Chemical Corp.’s $43 billion proposal in February to buy Swiss pesticide maker Syngenta AG. Both moves followed a plan unveiled in December by U.S. competitors DuPont Co. and Dow Chemical Co. for a $65.6 billion merger and subsequent three-way split.

For the latest story about Bayer’s move on Monsanto, click here

In the face of what has amounted to the biggest-ever wave of agrochemicals deals and despite speculation that the German company would wade into the fray, BASF has so far kept to the sidelines.

“If there’s an opportunity we will move -- as we have done in the past and as we will do in the future,” Gandhi said in the interview, which focused on Asia. “There must be a very strong strategic fit. The valuations are also for us something that must be value-accretive and it must make sense to us and to our shareholders.”

BASF shares rose 1 percent to 69.80 euros at 1:24 p.m. in Frankfurt. They are down 1.4 percent so far this year, outperforming Germany’s benchmark DAX index, which has lost 5.2 percent.

BASF’s acquisitions during the past decade stand in stark contrast to the size of the recent deals in the sector. Its biggest under Chief Executive Officer Kurt Bock was the $1.25 billion spent on oil and gas assets from Statoil ASA. The only other purchase that surpassed the billion-dollar mark was seed-treatment supplier Becker Underwood Inc in 2012. BASF’s largest-ever acquisition was the $5.4 billion purchase of catalyst maker Engelhard Corp. in 2006 under Bock’s predecessor.

Pruning

Bock has instead opted to prune the sprawling company’s portfolio, offloading larger businesses than the ones he has acquired. During his five years at the helm, revenue has been reduced by a net 18.1 billion euros due to disposals, including 12 billion euros from a gas-trading business that BASF passed to Gazprom PJSC in an asset swap. Still to come is a coatings business that will go to Akzo Nobel NV at the end of June for 475 million euros.

In the lead up to their merger announcement, Bock’s counterparts at Dow Chemical and DuPont had to contend with activist investors agitating for change. As the only chemicals conglomerate with businesses still spanning from oil to shampoo ingredients, Gandhi played down the possibility activist shareholders could influence strategy in Ludwigshafen. BASF has a consistent strategy and doesn’t get distracted by short-term market fluctuations, he said.

“There will be crises, there will be ups and downs and commodity fluctuations,” Gandhi said. “For us it’s important that we have a sensible strategy, a plausible strategy and we stick to it. At least what people cannot blame us for is being inconsistent.”

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