2.4 – Acquisitions and divestitures

Acquisitions

In 2015, BASF acquired the following activities:

• On February 12, 2015, BASF concluded the acquisition, announced on December 8, 2014, of the business from Taiwan Sheen Soon Co., Ltd. (TWSS), Lukang Town, Taiwan. TWSS is a leading manufacturer of precursors for adhesives based on thermoplastic polyurethanes (TPU). Following receipt of the official approval, BASF also took over TWSS’s activities on the Chinese mainland, effective December 1, 2015. The takeover consolidated BASF’s market position in the areas of TPU extrusion and injection molding for various industries. BASF can now offer its customers complete solutions for TPUs and TPU adhesives. At BASF, the activities have been integrated in the Performance Materials division.
• On February 18, 2015, BASF took over technologies, patents and know-how for silver nanowires from Seashell Technology LLC, based in San Diego, California. Through this acquisition, BASF has extended its product portfolio for displays in the Electronic Materials business unit, which is part of the Monomers division.
• On February 24, 2015, BASF acquired a 66% share from TODA KOGYO CORP., based in Hiroshima, Japan, in a company to which TODA had contributed its business with cathode materials for lithium-ion batteries, patents and production capacities in Japan. The transaction had been announced on October 30, 2014. The company focuses on the research, development, production, marketing and sales of a number of cathode materials. At BASF, the activities were assigned to the Catalysts division.
• On March 31, 2015, BASF concluded the acquisition of the polyurethane (PU) business from Polioles, S.A. de C.V., based in Lerma, Mexico, that was announced on July 10, 2014. Polioles is a joint venture with the Alpek Group. BASF holds a 50% share, which is accounted for using the equity method. The acquisition comprised marketing and selling rights, current assets, and to a minor extent, production facilities. The business has been assigned to the Performance Materials division.
• On April 23, 2015, BASF concluded an agreement with Lanxess Aktiengesellschaft, Cologne, Germany, on the acquisition and use of technologies and patents for the production of high-molecular-weight polyisobutene (HM PIB). The transaction furthermore included the acquisition of selling rights and current assets as well as a manufacturing agreement in which Lanxess will produce HM PIB exclusively for BASF. The activities were allocated to the Performance Chemicals division.

The purchase prices for businesses acquired in 2015 totaled €224 million; as of December 31, 2015, payments made for these amounted to €142 million. The purchase price allocations were carried out in accordance with IFRS 3. The resulting goodwill amounted to €19 million. In the course of the acquisition from TODA, minority interests in the amount of €42 million were recognized, measured at fair value. The purchase price allocations consider all the facts and circumstances prevailing as of the respective dates of acquisition which were known prior to the preparation of the Consolidated Financial Statements. In accordance with IFRS 3, should further facts and circumstances become known within the 12-month evaluation period, the purchase price allocation will be adjusted accordingly.

In 2014, BASF acquired the following activities:

• On October 31, 2014, BASF completed the acquisition of a 2.5% share in the Brage production field in the Norwegian North Sea from Tullow Oil Norge AS, Oslo, Norway, in the Oil & Gas segment. With this acquisition, BASF increased its investment in Brage to a total of 35.2%.
• On December 1, 2014, in its Oil & Gas segment, BASF concluded the acquisition agreed upon with Statoil Petroleum AS (Stavanger, Norway) on September 12, 2014, of shares in the Gjøa (5%) and Vega (24.5%) production fields, the Aasta Hansteen development project (24%), the Asterix discovery (19%) and the Polarled pipeline project (13.2%), in addition to four exploration licenses near Aasta Hansteen. Along with Gjøa and Vega, Aasta Hansteen – with Polarled as its technical link to the European gas distribution network – and Asterix were also classified as businesses according to IFRS 3. Together with the exploration licenses, they were measured in accordance with IFRS 3. The purchase price amounted to $1.25 billion, or €1.0 billion. Furthermore, BASF agreed to pay up to an additional $50 million if the Aasta Hansteen field is developed according to the project plan.

The preliminary purchase price allocation from the previous year for the acquisition of assets from Statoil on December 1, 2014, was reviewed at the end of the 12-month evaluation period as per IFRS 3; parts were adjusted on the basis of more detailed information on the production and cost profiles of the acquired fields and licenses. This led to a €74 million reduction in noncurrent assets to €1,089 million, and a €57 million reduction in noncurrent liabilities to €517 million. Furthermore, the expected value of the payment obligation to Statoil in connection with the development of the Aasta Hansteen field was reduced by €10 million to zero. Taking into account a cash-effective adjustment of €4 million, the total purchase price was €961 million. The adjustments led to a total increase of goodwill in the amount of €7 million to €590 million. The goodwill recognized was nearly entirely due to deferred tax liabilities.

The purchase price allocation in connection with the acquisition of a 2.5% stake in Brage from the previous year was not adjusted.

The following overview shows the effects of the acquisitions conducted in 2015 and 2014 on the Consolidated Financial Statements. If acquisitions resulted in the transfer of assets or the assumption of additional liabilities, these are shown as a net impact.

Divestitures

In 2015, BASF divested the following activities:

• On March 31, 2015, BASF sold its white expandable polystyrene (EPS) business in North and South America to Alpek S.A.B. de C.V., Monterrey, Mexico. The sale comprised customer lists and current assets in addition to production facilities in Canada, Brazil, Argentina and the United States. The disposed activities had been part of BASF’s Performance Materials division. The shares in Aislapol S.A., based in Santiago de Chile, Chile, were also sold. Polioles, a joint venture accounted for using the equity method, transferred its white EPS business to Alpek.
• On June 30, 2015, BASF concluded the divestiture announced on October 16, 2014, of its global textile chemicals business to Archroma Textiles S.à r.l., Luxembourg. The portfolio comprised products for pretreatment, printing and coating. The transaction furthermore involved the transfer of the subsidiary BASF Pakistan (Private) Ltd., based in Karachi, Pakistan, completed in the third quarter of 2015. The textile chemicals business had been part of the Performance Chemicals division.
• Effective July 1, 2015, BASF sold its 25% share in SolVin to its partner, Solvay. SolVin was established in 1999 by Solvay and BASF for the production of polyvinylchloride (PVC). At BASF, the SolVin investment and the income associated with it had been allocated to the Monomers division.
• On September 30, 2015, BASF concluded the agreed-upon sale of portions of its pharmaceutical ingredients and services business to Siegfried Holding AG, based in Zofingen, Switzerland. This involved the custom synthesis business and parts of the active pharmaceutical ingredients portfolio. The transaction comprised the divestiture of the production sites in Minden, Germany; Evionnaz, Switzerland; and Saint-Vulbas, France. At BASF, the activities had been allocated to the Nutrition & Health division.
• On November 1, 2015, BASF divested its global paper hydrous kaolin business to Imerys Kaolin, Inc., Roswell, Georgia, as announced on June 8, 2015. The divestiture included the kaolin processing production site in Wilkinson County, Georgia. For a limited period of time, BASF will take care of the order production for the paper hydrous kaolin business on behalf of Imerys, in order to smooth the transfer for the customers. The activities at BASF had been allocated to the Performance Chemicals division.

In the first-half and third quarter interim reports for 2015, an agreement was reported with Tellus Petroleum AS, Oslo, Norway, to sell shares in several fields and exploration licenses on the Norwegian continental shelf. On December 22, 2015, BASF complied with the request from Tellus Petroleum to release it from its obligation arising from the purchase contract, announced on June 18, 2015. The disposal group created for this planned transaction was dissolved.

Asset swap with Gazprom

In its Oil & Gas segment, BASF concluded the swap of assets of equal value with Gazprom on September 30, 2015, with retroactive economic effect to April 1, 2013. As a result of the transaction, BASF received an economic share of 25.01% in blocks IV and V of the Achimov formation of the Urengoy natural gas and condensate field in western Siberia. According to the development plan originally confirmed by Russian authorities, blocks IV and V have total hydrocarbon resources of 274 billion cubic meters of natural gas and 74 million metric tons of condensate. As these figures are still undergoing review, new findings may give rise to adjustments. Production is scheduled to start up in 2018.

In return, BASF transferred its shares in the previously jointly run natural gas trading and storage business to Gazprom. This included the 50.02% shares in the following: the natural gas trading company WINGAS GmbH, Kassel, Germany; the storage company astora GmbH & Co. KG, Kassel, Germany, which operates natural gas storage facilities in Rehden and Jemgum, Germany; and WINGAS Holding GmbH, Kassel, Germany, including its share in the natural gas storage facility in Haidach, Austria. BASF also transferred its 50% share in each of the natural gas trading companies Wintershall Erdgas Handelshaus GmbH & Co. KG, Berlin, Germany, and Wintershall Erdgas Handelshaus Zug AG, Zug, Switzerland. Gazprom furthermore became a 50% shareholder in Wintershall Noordzee B.V. in Rijswijk, Netherlands, which is active in the exploration and production of natural gas and crude oil deposits in the North Sea. Because the transaction is economically retroactive to April 1, 2013, BASF will pay Gazprom a cash compensation estimated to total €50 million.

As a result of the disposal of its 50% share in Wintershall Noordzee B.V., BASF no longer exerts control over the company alone, but rather shares joint control with Gazprom. In accordance with IFRS 10, Wintershall Noordzee B.V. was reclassified in the Consolidated Financial Statements from a fully consolidated company to a joint venture accounted for using the equity method from this point in time.

The following table shows the balance sheet values of the assets and liabilities that went to Gazprom as a result of the swap, taking into account 100% of the balance sheet values of Wintershall Noordzee B.V., as of the point of transfer from full consolidation to the equity method:

The swap of assets of equal value is treated in accordance with IAS 16.26. As per this regulation, the fair value of the assets received is deemed to constitute their acquisition cost. The acquisition of the 25.01% economic share in blocks IV and V of the Achimov formation was conducted through a capital share in two Russian companies that will be equity accounted as associated companies in BASF’s Consolidated Financial Statements due to the material influence BASF exercises over them. As of September 30, 2015, both companies, together with the now-50% share in Wintershall Noordzee B.V., were measured at fair value and reported as investments accounted for using the equity method.

The following overview shows the individual components of BASF’s profit realization from the asset swap with Gazprom and the reclassification of Wintershall Noordzee B.V.:

To determine the fair value of the investments in Achimov IV/V and Wintershall Noordzee B.V. as per IAS 28, the proportional share of assets and liabilities was measured in accordance with IFRS 3. As per IFRS 3, the purchase price allocation is to be adjusted accordingly if facts and circumstances become known within the 12-month evaluation period that apply at the time of sale or transfer. Accordingly, the determined fair values and the resulting earnings arising from the asset swap and the transfer from Wintershall Noordzee B.V. are to be seen as preliminary.

In 2014, BASF divested the following activities:

• On March 25, 2014, BASF concluded the sale of selected oil and gas investments in the North Sea to the Hungarian MOL Group, as agreed upon on December 12, 2013. In addition to 14 licenses, MOL also purchased BASF’s shares in the infrastructure of the Sullom Voe Terminal and in the Brent Pipeline System.
• On June 2, 2014, BASF completed the sale of its PolyAd Services business to Edgewater Capital Partners, L.P. The activities had been allocated to the Performance Chemicals division.
• Effective as of November 17, 2014, BASF sold its 50% share in Styrolution Holding GmbH, Frankfurt am Main, Germany, to the INEOS Group. The partnership agreement of 2011 already included a cross option, giving BASF the option to sell its share in Styrolution and INEOS the option to buy BASF’s share in Styrolution. The share in Styrolution and the related income had been allocated to Other.
• On December 31, 2014, BASF completed the sale of its 50% stake in the joint operation Ellba Eastern Private Ltd., Singapore, which produces propylene oxide and styrene monomers, to its partner Shell. The activities of Ellba Eastern had been allocated to BASF’s Petrochemicals division as well as to Other.

The following overview shows the effects on the Consolidated Financial Statements of the asset swap with Gazprom and the divestitures conducted in 2015 and 2014. The line item sales reflects the year-on-year decline resulting from divestitures. The impact on equity relates mainly to gains and losses from divestitures.