NEWS OF THE WEEK
BASF INKS BID FOR COGNIS SPECIALTIES: Latest acquisition will strengthen BASF’s position in home and personal care
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BASF will acquire Cognis and its facilities, including this one in Jacareí, Brazil, as part of a new deal. COGNIS
N A DEAL VALUED AT $3.8 billion, BASF is buy-
ing personal care chemical maker Cognis from the private equity firms GS Capital Partners, Permira Funds, and SV Life Sciences. The acquisition has been widely anticipated. Published reports have been circulating for months that BASF, the world’s largest chemical maker, was vying with the much smaller U.S. specialty chemical firm Lubrizol to purchase Cognis. In the end, BASF will pay $860 million in cash and assume about $2.9 billion of Cognis’ net debt and pension obligations. Cognis, which has its headquarters in Monheim, Germany, had $3.2 billion in sales and $400 million in earnings before taxes in 2009. It was the chemical business of consumer products maker Henkel until the private equity firms purchased it in 2001. With an emphasis on renewable raw materials, Cog-
PUSH TO RENEW SUPERFUND TAX INDUSTRY CLEANUP: EPA urges
Congress to pass legislation reinstating tax on chemicals and oil
DREAMSTIME
If reimposed, the Superfund tax would help pay for cleanups at toxic waste sites such as this Sacramento rail yard.
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HE ENVIRONMENTAL PROTECTION Agency
has written a letter to Congress supporting legislation that would renew the tax on chemical feedstocks and crude oil to pay for cleanups at Superfund hazardous waste sites. “Since the beginning of this Administration, we have made it clear that we support the reinstatement of the polluter pays system for the Superfund program,” wrote Mathy Stanislaus, EPA’s assistant administrator for solid waste and emergency response. “Today we are formalizing our call to Congress to pass this important legislation.” WWW.CEN-ONLINE.ORG
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nis makes surfactants, emulsifiers, emollients, rheology modifiers, and active ingredients for the personal and home care sectors. It also produces nutritional ingredients such as sterols and vitamin E. BASF says the acquisition will boost its position in the global personal care ingredients business from third to first, as well as solidify its leading position in home care. “Our motto is to strengthen our strengths and eliminate our weaknesses,” BASF Chairman Jürgen Hambrecht told analysts. “We want to make our portfolio more competitive and cyclically resilient.” The purchase extends a string of multi-billion-dollar mergers and acquisitions (M&A) for BASF. In 2006, it purchased Engelhard and acquired Degussa’s construction chemical business. Last year, it bought Ciba. Analysts say Cognis is one of BASF’s better deals. “BASF’s acquisitions have yet to pay real dividends,” Morgan Stanley stock analyst Paul R. Walsh wrote in a note to clients, referring to the Degussa and Engelhard purchases. “As a result, there may be some skepticism surrounding yet more M&A for BASF.” But he argues that “Cognis represents a solid acquisition.” Hambrecht told analysts that he now wants BASF to focus on improving cash flow, reducing debt, and maintaining a solid credit rating. “This means that there will be no further substantial acquisitions in the foreseeable future,” he said.—ALEX TULLO
The tax was part of the original 1980 Superfund law. It imposed a charge on 42 industrial chemicals and every barrel of crude oil and included a corporate environmental income tax. That tax expired in 1995. If reimposed, it could cost companies about $1.7 billion annually. “By renewing the tax, the industries that had a hand in creating the problem—not taxpayers—will once again be held accountable for cleaning it up,” Rep. Earl Blumenauer (D-Ore.) said in a statement. Blumenauer is a sponsor of a bill in the House of Representatives to reinstate the tax (H.R. 564). In the Senate, Frank R. Lautenberg (D-N.J.) also introduced a bill (S. 3164) to reimpose the tax. The chemical industry adamantly opposes this tax. In response to EPA’s letter, the American Chemistry Council, a trade association representing the largest chemical makers, said that reimposition of the tax is a “lose-lose for the environment and the economy.” “America’s chemical makers and others targeted by the Superfund tax have paid for site remediation several times over,” ACC President and CEO Calvin M. Dooley said in a statement. “We paid for sites for which we were responsible, we helped pay for ‘orphan’ sites where we were not the responsible party, and we paid the corporate environmental income tax. It would be inappropriate and unfair to impose Superfund taxes on companies with no responsibility for site contamination.” ACC also maintains that reimposition of the Superfund tax will result in loss of jobs and damage to the U.S.’s global competitiveness.—DAVID HANSON
JUNE 28, 2010
