Report: BASF marketing Solvay assets to save deal

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Initial market investigation raised competition concerns for the supply of a number of essential inputs for the polyamide production chain.

German chemical giant BASF SE's attempts to gain approval for its €1.6bn acquisition of Solvay SA's nylon business have taken another step forward, according to Reuters.

BASF is marketing some of the assets of the Belgium-based chemical group's nylon business to other companies that tried to buy the Solvay business in a 2017 auction, the news agency reports in an 8 Jan story from Frankfurt citing people close to the matter.

The companies reportedly include South Korea-based SK Innovation, China-based King Fa, and private equity firm SK Capital, which owns Ascend Performance Materials, a producer of adiponitrile (ADN).

ADN is the essential raw material to make hexamethylene diamine, which is the primary component of polyamide 6/6 - a material used extensively in the auto industry for its high heat resistance.

The portfolio that BASF is marketing also includes engineering assets of interest to other chemicals companies like Lanxess, Reuters reports. The portfolio reportedly has an estimated core value of €60m and an enterprise value of 7-8 times that.

BASF officials declined comment and Solvay officials couldn't be reached, according to the news agency.

The report did not specify what lines may be sold, but prior to the acquisition announcement Solvay had been heavily involved in other engineering resins such as polyphenylene sulfide while BASF showed a new group of polyphthalamide (PPA) compounds at Fakuma 2018.

The European Commission set a 25 Jan deadline for its ruling on the proposed BASF-Solvay deal, which was called into question by antitrust regulators. The transaction involves the only European production site for ADN, and there are concerns about price increases for polyamide products with only a few manufacturers supplying the key raw materials.

PA 6/6 was in short supply in 2018 because of a lack of ADN feedstock and some resin buyers expect that to continue through this year.

BASF officials have said the proposed Solvay deal is part of a business strategy to strengthen its vertical integration by acquiring the only part of the PA 6/6 production process it doesn't have in-house. They contend ADN production, which has been exclusive to Solvay, is simply changing hands between two companies.

To appease the European Commission, BASF offered a remedy package last October, saying it would refrain from acquiring some Solvay assets and technologies, which would be divested separately. The deal is important to BASF to improve its nylon business and expand in Asia and South America while Solvay is looking to divest some products and focus on higher-margin applications in the aerospace, automotive and oil-and-gas industries.

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