BASF's Evonik deal chemistry outweighs the doubts

BASF SE

28/09/2026 11:24

The author is a Reuters Breakingviews columnist. The opinions expressed are her own.
By Yawen Chen
LONDON, Sept 28 (Reuters Breakingviews) - At first glance, Markus Kamieth’s pursuit of Evonik EVKn.DE makes an overstuffed to-do list even trickier. Since taking the top job in 2024, the BASF BASFn.DE chief executive has pushed the €45 billion German chemicals giant to prune businesses and cut costs, while preparing its Agricultural Solutions arm for a possible flotation. Judging by a near-5% fall in his company's shares since the Financial Times first reported Evonik talks on Friday — later confirmed by BASF and Evonik — his investors are cool on his new idea. That doesn't mean it's a non-starter.
BASF spans basic chemicals, plastics and consumer ingredients. Evonik is smaller and more specialised, making additives, polymers and animal-feed ingredients. Evonik’s 2025 EBITDA margin was about 13%; Deutsche Bank estimates BASF’s core businesses were closer to 9%. Baader analysts also note that the companies often sell different products to the same customers, including polyurethane makers and animal-feed producers.
The industry backdrop makes consolidation more tempting. European chemicals makers have endured high energy costs since Russia invaded Ukraine, with this year’s Iran conflict adding another shock, while demand remains weak and overseas rivals can often produce more cheaply. AkzoNobel and Axalta are already planning to merge, while ADNOC has bought Covestro. Bernstein estimates around 27% of the combined asset base would be in Germany, creating scope to remove overlapping costs.
The financial logic also stacks up. Assume BASF offers a 30% premium to Evonik’s undisturbed price. Adding €3.6 billion of net debt gives an enterprise value of €14.6 billion. Annual savings equal to 5% of Evonik’s 2025 sales would be about €700 million, a level Bernstein regards as conservative relative to past chemicals deals. Add that to €1.1 billion of expected 2028 operating profit and tax the total at 30%. The resulting €1.2 billion implies a return of roughly 8.5%, above Evonik’s 7.8% estimated cost of capital.
The hurdles are real. Evonik is already cutting thousands of jobs, so some savings may overlap with its own restructuring. German labour unions could make further cuts slower or costlier, while Baader analysts flag antitrust risk where the companies compete directly, especially in personal-care ingredients. RAG-Stiftung, Evonik’s 44% shareholder, may require a chunkier premium. BASF, meanwhile, has not attempted a takeover this large in two decades.
Still, Kamieth looks to have scope to pay a little more before destroying value. And Brussels trustbusters are much less antsy about European champions than they were. That suggests Europe's latest big chemicals merger may find a way to happen.
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CONTEXT NEWS
BASF said on September 25 it was in exploratory talks with Evonik Industries and RAG-Stiftung —  the German foundation that owns about 44% of Evonik — about a potential takeover of the company, adding that the course and outcome of the discussions remained open.
Evonik said the same day it had received a non-binding approach from BASF regarding a possible voluntary public takeover offer for all its shares, while saying there were currently no talks taking place.
Evonik shares were up 7% as of 1000 GMT on September 28 from their September 24 close, while BASF shares had fallen nearly 5%.

(Editing by George Hay; Production by Varun H K)
((For previous columns by the author, Reuters customers can click on CHEN/yawen.chen@thomsonreuters.com))