BASF, CVC Explore Forming Construction-Chemicals Giant

(Bloomberg) -- BASF SE and private equity firm CVC Capital Partners are exploring the option of combining their construction-chemicals businesses to create a grouts and sealants supplier valued at as much as 6 billion euros ($6.8 billion), according to people with knowledge of the situation.

The negotiations for the creation of a joint venture, which is one of the alternatives under discussion, are at an early stage, the people said, declining to be identified because the matter is confidential. No final decisions have been made, and other partners or suitors may emerge for the assets, they said.

Differing views on the value of the two businesses may pose a hurdle to the discussions, the people said. The BASF chemicals unit that develops products for the construction industry is likely to be worth about 3 billion euros, the people said. France’s ParexGroup SA -- backed by CVC -- may be valued at about 2.5 billion euros, they said.

Representatives for BASF ad CVC declined to comment.

A transaction would mark the latest in a series of of bold moves by BASF Chief Executive Officer Martin Brudermueller, who has proposed construction of a second manufacturing site in China costing $10 billion and signaled the potential for asset disposals since he took the helm in May. In October, he disclosed that the chemicals behemoth would explore options including a sale or merger for the construction products unit, with a decision next year.

Joining forces with Parex and retaining a stake in the combined business would give BASF the option of exiting at a later date through an initial public offering, potentially tapping into higher returns on the investment.

CVC is working with Lazard Ltd. on exploring a potential sale of Parex, people familiar with the matter said last month.

--With assistance from Sarah Syed.

To contact the reporters on this story: Andrew Noël in London at anoel@bloomberg.net;Eyk Henning in Frankfurt at ehenning1@bloomberg.net;Ruth David in London at rdavid9@bloomberg.net;Kiel Porter in New York at kporter17@bloomberg.net

To contact the editors responsible for this story: Anthony Palazzo at apalazzo@bloomberg.net, Chitra Somayaji, Amy Thomson

©2018 Bloomberg L.P.