BASF Made a Merger Approach to Evonik, Report Says
A combination of Germany's two largest chemical groups would create a European giant, but the proposal faces deep political and structural complications.
What Happened
BASF, the world’s largest chemical company by revenue, made an informal merger proposal to German rival Evonik Industries, Bloomberg reported. No deal terms or price were disclosed, and it is not clear whether talks are ongoing or whether Evonik’s board has engaged seriously with the approach. Both companies are under significant pressure: BASF has been cutting costs and restructuring its European asset base for the past two years, while Evonik has been selling specialty businesses and reducing headcount to shore up margins.
The report alone is enough to move the conversation in Berlin and Brussels. A combined group would dwarf European peers and sit close to the scale of US and Asian rivals, but the ownership structure on Evonik’s side, where RAG-Stiftung, a German public foundation managing legacy mining liabilities, holds a majority stake, means any deal is as much a political transaction as a financial one.
Why It Matters
The industrial logic is real, but so are the obstacles. BASF and Evonik have limited direct product overlap; BASF is heaviest in commodity and intermediate chemicals, while Evonik has spent years shifting toward specialty nutrition, animal feeds, and performance materials. That complementarity is exactly what makes a combination attractive on paper. In practice, German merger control, EU competition review, and the near-certainty of works-council opposition would put any formal process under sustained scrutiny for well over a year.
RAG-Stiftung’s position is the critical variable. The foundation holds roughly 59% of Evonik and has a specific mandate to fund the ongoing remediation costs of Germany’s former coal-mining regions. It cannot simply sell down or accept an all-share deal without being confident the resulting holding covers those liabilities over decades. That constraint limits how creative a deal structure can get, and it gives the foundation effective veto power regardless of what BASF’s board or Evonik’s minority shareholders might prefer.
The wider context is European chemical consolidation under pressure. Chinese overcapacity in basic chemicals has been compressing margins across the industry for two years. Both BASF and Evonik have flagged Europe’s high energy costs as a structural drag, and both have been asked, explicitly or implicitly, by the German government to maintain domestic employment. A merger that promised global scale might find political support in theory; one that came with announced plant closures would face a different reception entirely.
- Regulatory timeline: A BASF-Evonik combination would face review by both the Bundeskartellamt and the European Commission. Given the combined market positions in several intermediate and specialty segments, remedies or outright opposition are plausible, not just theoretical.
- RAG-Stiftung's liability constraint: If the foundation calculates that a merged entity's dividend capacity or balance-sheet profile does not reliably cover decades of mining remediation costs, it will not consent. That bar may simply be too high for BASF to clear at any realistic price.
- Integration risk: BASF is still midway through its own restructuring. Absorbing a company of Evonik's complexity while simultaneously cutting its own European cost base would stretch management bandwidth and could delay BASF's margin recovery by years.
- Scale versus Asia: A merged group would have the procurement power, R&D budget, and geographic reach to compete directly with Chinese national champions that have been undercutting European producers on price. That argument will resonate in Berlin as the government looks for ways to keep strategic industry on German soil.
- Portfolio fit: Evonik's specialty nutrition and performance materials businesses carry higher margins than BASF's commodity exposure. Adding them without much product overlap means less regulatory friction than a same-segment deal, and gives the combined group a better margin mix from day one.
Source: “merger OR acquisition OR “takeover bid” when:2d” - Google News