3 – Acquisitions and Divestitures

Acquisitions

BASF closed the acquisition of Solvay’s polyamide business (PA 6.6) on January 31, 2020. DOMO Chemicals, Leuna, Germany, was approved by the E.U. Commission as the buyer of the European polyamide business, which could not be acquired by BASF under the conditions imposed by the authorities. The transaction broadens BASF’s polyamide capabilities with innovative and well-known products such as Technyl^®. It also enhances the company’s access to growth markets in Asia as well as in North and South America. Through the backward integration into the key raw material adiponitrile (ADN), BASF is now represented along the entire polyamide 6.6 value chain and can offer improved delivery reliability. The purchase price of the business acquired by BASF was €1.3 billion on a cash and debt-free basis. The business was integrated into the Performance Materials and Monomers divisions. The transaction between Solvay and BASF included eight production sites in Germany, France, China, India, South Korea, Brazil and Mexico, as well as research and development and technical consultation centers in Asia and the Americas. It also included two investments in France, which are accounted for as joint operations: the 50% interest in Butachimie SNC, Chalampé, France, to produce ADN and hexamethylenediamine, and the 51% interest in the newly established Alsachimie S.A.S., Chalampé, France, to produce adipic acid. With the acquisition, around 700 Solvay employees were transferred to BASF.

The preliminary purchase price allocation considers all the facts and circumstances prevailing as of the date of acquisition that were known prior to the preparation of these Consolidated Half-Year Financial Statements. In accordance with IFRS 3, should further such facts and circumstances become known within the 12-month measurement period, the purchase price allocation can be adjusted accordingly.

Goodwill of €118 million resulted in particular from cost and sales synergies.

Agreed transactions

• On August 29, 2019, BASF and the fine chemicals company DIC, Tokyo, Japan, signed an agreement on the transfer of the global pigments business. The purchase price on a cash and debt-free basis is €1.15 billion. The transaction is expected to close in the fourth quarter of 2020. The sale is subject to approval by the relevant antitrust authorities. The transaction affects approximately 2,600 employees in the Dispersions & Pigments division.
• On December 21, 2019, BASF and a subsidiary of Lone Star, Dallas, Texas, signed an agreement on the sale of BASF’s construction chemicals business. The purchase price on a cash and debt-free basis is €3.17 billion. The transaction is expected to close in the third quarter of 2020, subject to the approval of the relevant antitrust authorities. The planned sale covers more than 7,000 employees as well as production sites and sales offices in more than 60 countries in the former Construction Chemicals division.

Discontinued operations

Earnings from the discontinued construction chemicals business were as follows:

The discontinued construction chemicals business accounted for the following amounts in the BASF Group’s statement of cash flows:

Groups of assets and liabilities held for sale (disposal groups)

With the agreement on the acquisition of the global pigments business by the fine chemical company DIC, the affected assets and liabilities were reclassified to a disposal group. The business is allocated to the Dispersions & Pigments division.

An impairment test was conducted for the disposal group for the pigments business on June 30, 2020. The recoverable amount was determined as of June 30, 2020, by discounting expected cash flows until closing, including income from the sale, at a WACC of 7.98%. This resulted in an impairment in the amount of €66 million, which reduced the goodwill of the disposal group for the pigments business accordingly.