London: BASF is working with advisers and financing banks on the merits of making a counter bid for DuPont, the $55 billion chemical company that agreed to a merger with Dow Chemical in December, people with knowledge of the matter said.
The German chemical producer hasn’t made a decision yet about proceeding with an offer, said the people, who asked not to be identified because the information is private. No formal approach has been made to DuPont, the people said.
The shares fell 1.7 per cent to €62.21 in Frankfurt. They have dropped 12 per cent since the start of the year.
BASF, the world’s biggest chemicals company, has been working with advisers since last year to explore a bid for DuPont, said the people. It held talks with the United States company before it agreed to merge with Dow and those talks didn’t progress, the people said.
BASF has so far missed out on a wave of consolidation within the industry that has focused on crop products like pesticides and seeds. This has come as years of low commodity prices continue to erode farmer incomes. Buying DuPont would give it more profitable businesses from food ingredients to enzymes as well as the second-biggest producer of seeds such as genetically-modified corn. Monsanto is the largest seed company.
Considered a deal
BASF chief executive officer Kurt Bock said in a Bloomberg Television interview last month that he considered a deal in the field of agricultural chemicals before deciding to stay put. Dow and DuPont in December announced the industry’s biggest ever deal, one that creates the world’s largest agriculture business and the second-biggest chemicals company after BASF. Last month, China National Chemical Company agreed to buy Switzerland’s Syngenta for about $43 billion, gaining the biggest pesticide maker.
“We look at the industry and try to understand what is our position,” Bock said. “We feel comfortable with what we have. You have to look at multiples, price expectations in the market, and have to make up your mind whether that is something which is really creating value or not.”
Representatives of BASF and DuPont declined to comment. DuPont, based in Wilmington, Delaware, jumped 5.3 per cent in after-hours trading. BASF, based in Ludwigshafen, Germany, has a market value of about €58 billion ($64 billion). Midland, Michigan-based Dow has a market value of about $56 billion.
Monsanto sparked the string of mega-deals with its unsuccessful bid last year for Syngenta. During the period described in October by Dow CEO Andrew Liverisas one when everyone was “talking to everyone,” the European companies appeared caught out by the speed and pressure for mergers and acquisitions.
For BASF, which has no seed business, DuPont would fill an important gap, said James Sheehan, an Atlanta-based analyst at Suntrust Robinson Humphrey. "Everyone else is combining and no one else wants to be left in a strategically weak position," he said by phone. "DuPont would be a good strategic fit for them."
DuPont discussed potential deals with multiple companies ahead of the December 11 agreement with Dow, according to a March 1 regulatory filing by DowDuPont, the name of the merged company. DuPont may be obligated to pay Dow a termination fee of $1.9 billion if it breaks the deal, the filing shows.