BASF Reveals Cognis Integration Plans

LUDWIGSHAFEN, GermanyBASF has reported the integration of recently acquired Cognis should net 275 million euros ($387 million USD) in earnings before income taxes (EBIT) from synergies, but about 450 jobs will be lost by the end of 2012, due mostly to overlap between the operations of both companies.

Over the past months, the joint integration teams have identified growth areas and defined cost synergies and worked out the plans to successfully integrate Cognis into the BASF Group, said Michael Heinz, BASFs global integration manager for Cognis. We will now work on implementing these measures to create additional value for our customers and for our company. We aim to complete the major parts of the structural integration by the end of 2011.

Growth synergies are expected to contribute EBIT of 135 million euros ($190 million USD) by 2015, including leveraging the extended customer base, the extended solution capabilities and innovation capabilities, as well as the regional setup of the combined business. By 2013, cost synergies should result in about 140 million euros ($197 million USD)5.4 percent of Cognis 2009 net salesdriven by a combination of procurement activities, the consolidation of administrative structures, the improvement of production efficiency as well as the consolidation of the IT landscape. The integration will notbe without its one-time costs, however, as BASF is planning on a 290 million integration charge, excluding an inventory step-up of 120 million, in 2010/2011, and an estimated 230 new jobs (primarily in the Care Chemicals Division) will only limit the overall job loss after factoring in 680 jobs expected to dissolve due to overlapping operations and planned efficiencies. In the end, management said the integration will already be accretive as of 2012, less than two years after the acquisition.

We see great potential for profitable growth in our Performance Products segment, said BASF exuecutive board member Dr. John Feldmann, who is responsible for the Performance Products segment and the Cognis integration. Through the acquisition, we have strengthened our activities in attractive growing markets such as personal and home care, nutrition and health, coating additives synlubes and mining chemicals. The businesses complement each other excellently and allow us to offer our customers a comprehensive portfolio of products and solutions from both renewable and petro-based chemistry.