The German chemicals group BASF is said to be preparing a bid for Cognis, the German speciality chemicals maker currently owned by private equity firms.
According to reports, BASF is in preliminary talks with Goldman Sachs and Permira, the firmÔÇÖs owners; however, it is not yet clear whether this will lead to a definite bid.
Monheim, Germany-based Cognis is valued at around Ôé¼3 billion ($4 billion) by its owners. It is a former unit of the glues and detergent maker Henkel.
Buying Cognis would help BASF catch up with its German rival Bayer and compete with Dow Chemical, the number two supplier in the coating industry. It would also help the company reduce its reliance on plastics and chemicals that Middle East competitors can produce more cheaply.
Goldman Sachs and Permira bought Cognis, which specialises in food additives, health products, detergents and other speciality chemicals, in 2001 for Ôé¼2.5 billion. However by the end of 2009, the company had accumulated debts of Ôé¼1.9 billion.
Cognis, which employs about 5,600 people, has reduced its workforce by 39 per cent since the end of 2001.
The companyÔÇÖs products are attractive to investors, as they are more resistant to economic cycles than those directly derived from oil and gas.
Goldman Sachs and Permira have tried to attract bids from strategic investors based in Europe and the US recently, with companies such as BelgiumÔÇÖs Solvay and GermanyÔÇÖs Evonik being viewed as potential bidders, as well as BASF.
According to Reuters, EvonikÔÇÖs CEO Klaus Engel has said that he would look at Cognis as a matter of routine. Solvay, which recently sold its pharmaceutical operations to Illinois, US-based Abbott Laboratories, has plenty of freed-up cash with which to make strategic investments.
Some companies, such as the German group Lanxess, were reportedly deterred by CognisÔÇÖ debt levels.
Goldman Sachs and Permira launched a bidding process for Cognis four years ago but pulled out when offers did not exceed Ôé¼3 billion.
The company returned to a net profit of Ôé¼25 million in 2009, after making a loss of Ôé¼49 million the previous year.
If BASF, the worldÔÇÖs largest chemical maker by revenues, does submit a bid, it would be its first following its acquisition of Swiss rival Ciba for almost Ôé¼5 billion last year.
