BASF SE agreed to buy a polyamides business from Solvay SA for 1.6 billion euros ($1.9 billion), adding a nylon plastics operation serving a range of industries from carmaking to construction.
The German chemical maker is paying about eight times last year's earnings before interest, taxes, depreciation and amortization, Brussels-based Solvay in a statement on Tuesday. Net sales at the asset were 1.32 billion euros in 2016, with profit of about 200 million euros, according to a BASF statement.
Solvay's shares declined 1.1 percent to 127.25 euros as of 9:52 a.m. in Brussels. Ludwigshafen, Germany-based BASF was down 0.2 percent at 87.25 euros.
For BASF, it's a pragmatic transaction, helping strengthen its existing operation by boosting exposure to markets in Asia and South America, and providing access to the raw material adipodinitrile. For Solvay, the sale is another step forward in Chief Executive Officer Jean-Pierre Clamadieu's transformation of the company into a maker of specialty chemicals.
The nylon technology is used in auto parts under the hood as well as in airbags and electrical products. BASF had to get formal consent from Koch Industries Inc., which has a joint venture with Solvay in the high-margin polyamides segment, to move ahead with the acquisition.
Disposal Drive
Solvay's emphasis has been on disposals since acquiring aerospace composites maker Cytec Industries for more than $6 billion and oil-and-gas chemicals supplier Chemlogics for $1.35 billion.
"It's the last significant move to transform the group," Solvay board member Pascal Juery said on a call. The Belgian company is retaining an intermediates and downstream fiber business in Brazil as this is integrated into the company's Coatis operation, he said.
Soda ash and peroxide businesses -- while not classified as specialty areas per se -- will be retained because they are cash generators and aren't particularly cyclical. Proceeds from the sale of polyamides will be channeled into reducing debt, Juery said.
Solvay and BASF aim to complete the deal in the third quarter of 2018.