German giant snaps up Swiss specialty chemicals firm in a £3 billion deal

Struggling Swiss speciality chemicals group Ciba has agreed to a SF6.1 billion (?3 billion) takeover deal by German chemicals giant BASF.

On 15 September BASF announced its offer to buy Ciba shares at SF50 per share - a premium of 32 per cent above the shares’ 12 September closing price, and 64 per cent above the average price over the preceding 60 trading days. On the same day, the Ciba board recommended their shareholders accept the offer, describing it as ’fair’.

’Against the backdrop of increasingly challenging conditions within our industry, this is a transaction that combines a fair price with an industrially compelling solution for Ciba,’ said Ciba chairman Armin Meyer. The Swiss firm has struggled in recent times to pass on to customers the soaring costs of energy and raw materials, and on 19 August reported a surprise loss for the second quarter of 2008.

’By joining with BASF and gaining access to its research, production and marketing platform, we will significantly strengthen Ciba’s businesses, especially in the areas of plastics, coatings and paper,’ added Meyer.

’We recognise the strength of the broad areas of Ciba’s portfolio, even if the company’s performance has disappointed analysts and investors, especially in the second quarter of 2008,’ said BASF chairman Jurgen Hambrecht. ’Ciba has a leading market position, in particular with its portfolio of plastics additives and coating effects materials,’ he added.

Ciba’s paper chemicals business has been particular drag on the company’s finances - and Hambrecht says the restructuring of this arm of the business will be intensified. Hambrecht predicts that the acquisition will have a positive impact on earnings per share by the second year.

As part of the deal, BASF has committed to retain certain Ciba production sites in Switzerland, and the company’s R&D activities will remain in Basel. In addition, BASF will establish a global operations division in the city. 

BASF says the offer period for the deal is expected to start on 1 October 2008, and will run for 30 days. The deal is dependant on two thirds of Ciba’s shareholders agreeing to tender their shares. The German firm says it expects to finalise the deal in the first quarter of 2009, and that it has the financing for the deal already in place.

James Mitchell Crow