BASF to buy Degussa construction chemicals unit?

By David Reed, UT EditorLudwigshafen, Germany- BASF AG has asked Degussa AG to enter into exclusive negotiations for it to acquire the firm's construction chemicals division, recently identified for disposal by the latter firm. One speciality of this business is its range of polyurethane-based systems for coating, sealing and waterproofing, as well as the Conipur brand of multilayered complex polyurethane surfaces such as racing tracks. The deal would allow BASF to expand its portfolio in a high-growth market through forward integration, a 16 Dec. statement from the chemicals major indicated. The division covers a wide range of materials including polyurethane-based products for indoor and outdoor sports surfaces as well as building systems, flooring applications, coatings and façades and expansion joints. The photograph shows one such application, a sports surface in the Berlin stadium.BASF says it plans to make a concrete offer for Degussa's business once it has completed a detailed review of the business case, according to a 16 Dec. statement, which adds that it wishes to start the review as quickly as possible.BASF says that, according to Degussa's annual report, the construction chemicals division posted sales of about €1800 million ($2120 million) with an EBIT of €201 million in fiscal 2004. It has a global workforce of about 7400 employees and markets over 40 000 products in the Americas, Europe and Asia-Pacific. The business operates in two segments: admixture systems and construction systems and introduces more than 100 new products every year, BASF reported. Most of Degussa's PU-related products are in the construction systems unit, which supplies customers in the building trade such as fabricators, contractors and dealers specialising in concrete and masonry renovation, waterproofing, sealing, adhesive systems, tile fixing, performance flooring, coatings and façades, exterior insulation and expansion joints.BASF already supplies chemical precursors to the construction chemicals industry, in particular to formulators of construction chemical products. Functional polymers from BASF improve the flow properties of concrete, protect its surface, or are used in concrete repair systems. Other applications for functional polymers made by BASF include adhesives for flooring and tiling, sealants, water-vapour barriers and primers. Functional polymers are also used in phase-change materials (PCMs) for indoor temperature management. Other construction chemicals from BASF include wood coatings and polyurethane systems for installation purposes.The global construction chemicals market is valued at around €13 000 million and has an attractive annual growth rate of about 4 percent, with relatively stable margins and high potential for innovation, the BASF statement said. The acquisition of Degussa's business would give BASF rapid access to additional industrial customers and end-users, the firm added. As market and technology leader and the largest supplier of construction chemical products, Degussa is an important global partner to the construction industry," said BASF board member Andreas Kreimeyer, in the prepared statement. "Together with our own activities, we can open up new growth potential," he added. "We are interested in this business because of its global reach, its presence in important growth markets, in particular North America and Asia, and because of the high level of knowledge and innovativeness of its employees," his statement concluded."