BASF approaches Evonik about a takeover; Evonik jumps 10% but says no talks are under way

BASF, the world's largest chemicals group, has approached German rival Evonik Industries about a takeover. The Financial Times first reported the approach on Friday. Evonik then confirmed in a regulatory disclosure that its executive board had received "a non-binding approach from BASF SE regarding a voluntary public takeover offer for all shares of the company." It added: "Currently there are no talks taking place."

Evonik shares traded at €19.84 in Frankfurt at 3:38 p.m. local time, up 9.8% from Thursday's €18.07 close, according to Yahoo Finance data. BASF fell 1.8% to €51.34.

What everyone should read twice: "no talks"

The headlines say BASF made a proposal. Evonik's own statement is more careful. It calls the contact an approach, says it is non-binding, and says no talks are taking place. A source told Reuters that the two companies are in contact. Those two accounts can both be true: a letter has been sent, and nobody is negotiating yet. Evonik said it will not comment further beyond its legal obligations. BASF declined to comment to Reuters.

The number that decides it: 43%

The RAG Foundation owns around 43% of Evonik, according to Reuters. Any deal needs its support. The foundation was not available for comment. That concentration makes this different from a typical hostile approach: BASF cannot win by appealing over the board's head to scattered shareholders, because one holder carries close to half the votes.

For scale: at today's price, every extra 10% of premium BASF might offer would add roughly €0.9 billion to the equity bill, on top of the net debt a buyer takes on. Today's jump already adds roughly €0.8 billion to Evonik's market value of that before any offer exists.

Why now

The logic offered in the reports is consolidation in a weak market. German chemicals production is expected to fall 1.5% this year, according to the industry group VCI, as cited by Reuters. The pitch for a merger is a German champion large enough to compete with Chinese and American rivals.

Who it matters to

• Evonik holders are now trading on the odds of a formal offer. The price has run ahead of a process the target says has not started.
• BASF holders sold on the news, the usual reaction when a buyer may have to pay a premium and take on another company's debt.
• U.S. industrial buyers of specialty chemicals will not see anything change soon. A public offer, if one comes, would still need the foundation's backing and regulatory approvals.

What to watch: any statement from the RAG Foundation, and whether BASF turns the approach into a formal offer with a price.

Sources: Evonik Industries AG ad-hoc disclosure; Reuters; Financial Times via Reuters; Yahoo Finance market data. Implied net debt, market value, stake value and premium arithmetic are Chronicle calculations. This is market information, not investment advice.