German chemicals edges toward consolidation as BASF circles Evonik

BASF's approach to Evonik is the most ambitious attempt in years to consolidate German chemicals from within. Reuters reported on 28 September that Evonik had rejected an indicative offer of about €22.15 a share, valuing the Essen-based group at roughly €10.3bn, as too low. BASF has confirmed exploratory talks with Evonik and its anchor shareholder, RAG-Stiftung, and says their outcome remains open. Evonik describes the contact as a non-binding approach aimed at a voluntary public offer for all of its shares, and has said no talks are currently taking place.

If a deal went ahead it would be the largest acquisition in BASF's history, ahead of the roughly €7.6bn it paid for Bayer seed and herbicide assets in 2018. Whether that happens depends less on the two boards than on a coal-mining foundation whose trustees include senior German politicians.

The price gap

Börsen-Zeitung calculates that the indicative price was a premium of almost 29% to Evonik's share price before the interest became public. Including net debt, the transaction would be worth about €14.2bn. By the paper's estimate, that is around seven times Evonik's expected 2026 EBITDA. It compares this with the multiple of more than 13 that ADNOC paid for Covestro, where the bidder had to raise an initial 37% premium to 55% before it succeeded. Specialty chemicals assets have typically fetched 10 to 14 times operating earnings, against six to nine for commodity chemicals.

BASF has declined to discuss price, saying its valuation rests on synergies that can only be verified with Evonik's involvement. Analysts cited by Industriemagazin estimate annual savings of about €700m to €1bn. Mergermarket reported that no improved proposal had followed the first approach.

Industrial logic, and doubts about it

The argument for the deal rests on complementary portfolios. BASF is strongest in basic and intermediate chemicals and Evonik in higher-margin specialties, and their combined revenue would be well above €70bn. A BASF source told Reuters that a takeover would strengthen customer-facing businesses and reduce dependence on Europe. Reuters also noted that BASF risks losing its position as the world's largest chemicals company by revenue to Sinopec.

Not everyone is persuaded. Advisers quoted by Mergermarket said buying a large domestic peer conflicts with chief executive Markus Kamieth's "Winning Ways" strategy, which has involved selling the coatings business to a Carlyle-led consortium and preparing agricultural solutions for an initial public offering. One called the approach "highly opportunistic". The setting is difficult as well. The VCI industry association reports that German chemical capacity utilisation was 75.1% in the first quarter of 2026, a level it considers unprofitable. The European industry body Cefic says about 9% of European capacity has been closed or earmarked for closure since 2022.

RAG-Stiftung as kingmaker

RAG-Stiftung, which finances the permanent liabilities left by German hard-coal mining, holds about 43% of Evonik according to the company. That is well above the 25% blocking minority under German law, so its consent is essential. Evonik is its largest single holding, and the foundation has long intended to reduce its stake towards a blocking minority. Its 13-member board of trustees includes, ex officio, the premiers of North Rhine-Westphalia and Saarland, the federal economy and finance ministers and the head of the IG BCE chemicals union. The board met to discuss BASF's interest but said the content and outcome of the meeting were confidential.

This makes the politics hard to avoid. The North Rhine-Westphalia state chancellery has said that jobs and the company's independent development must not be called into question. IG BCE has raised "open and critical questions" about sites, investment and employment. Börsen-Zeitung expects that RAG's support would require far-reaching site guarantees. One consultant warned that arbitrary guarantees would kill the deal, since the synergies depend on cutting duplicated plants and functions.

Consolidator or consolidated

The broader trend explains why BASF may be acting now. Börsen-Zeitung argues that European chemicals groups have been the consolidated rather than the consolidators. Covestro has gone to Abu Dhabi, BASF's coatings arm to Carlyle and Qatar, and LyondellBasell's European olefins assets to Munich investor Aequita. With a fully free-floating share register, BASF could itself be a target for cash-rich Gulf groups in time. Moody's analysts identify three barriers to a deal: European competition law, politics and cost-benefit. Clearing all three would require a higher price and a structure that RAG's trustees can defend in Düsseldorf and Berlin.