BASF, the world's largest chemicals company has agreed to buy Degussa's specialty business for 2.2 bln euros (US$2.6 billion). The transaction is estimated to be complete by midyear, subject to clearance from competition authorities.
BASF expects the market for construction chemicals to grow at a rate of 4-5% per annum. This acquisition will provide steadier revenue and margins to buffer the next cyclical decline in commodity chemicals. Specialty chemicals do not tend to fluctuate with the cost of oil and the world economy like commodity petrochemicals. Consolidation is picking up in the chemicals industry as companies adjust to changing supply and demand in various markets. While growth is slowing in mature European and U.S. markets, leaving companies with excess production capacity, surging demand in Asia has led chemical makers to build more plants and shift manufacturing there.
Mining company RAG, which controls more than 95% of Dusseldorf, Germany-based Degussa, may use proceeds from the sale to pay off the cost of buying the parts of Degussa not owned by the company.
03-Mar-06 
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