June 19, 2019 / 2:47 PM / a year ago

Banks line up €1.7bn for BASF CC unit sale

LONDON, June 19 (LPC) - Bankers are lining up around €1.7bn of debt financing to back a potential sale of German chemicals group BASF’s construction chemicals business as bidders get ready to submit first round bids in an auction process, banking sources said.

Goldman Sachs is running the sale process of the unit, one of the world’s largest makers of chemical additives for concrete, which could fetch around US$3bn, the sources said.

The sale is attracting a lot of interest from trade buyers and private equity firms and first round bids in an auction process are due June 21, the sources said.

BASF Chief Executive Martin Brudermueller unveiled plans in October to review the unit as the business looks for ways to boost the group’s share price.

“As planned, we started to contact selected interested parties,” a BASF spokesperson said, but declined to comment further.

Some €1.7bn of debt financing equates to around 6 times the unit’s approximate €263m Ebitda, the sources said.

Banks are expected to fund a buyout with leveraged loans.

Bankers and cash-rich leveraged loan investors are hoping the unit will be sold to private equity following a lack of event-driven financings so far in 2019.

Banks and investors have a lot of money to put to work, which can make financing an acquisition quite attractive as lenders compete against each other to offer the most attractive terms.

However, the unit is drawing comparisons to a €1.785bn leveraged loan backing private equity firm Advent’s acquisition of German chemicals group Evonik’s methacrylates plastics unit, Madrid, which has struggled in syndication having met strong resistance from investors wary about investing in a cyclical business.

Banks stand to make no fees on the Evonik transaction and are likely to be overexposed, holding the remaining paper they were unable to sell down despite deep discounts.

BASF has had two years of declining Ebitda, the sources said.

“Both companies are at the cyclical end of the market but BASF is a difficult carveout and is arguably more cyclical as it is much more construction related. The raw material side and pricing on Evonik is volatile but easy to predict, whereas BASF is far more tied to oil price, which could affect a debt financing,” a senior banker said.

Companies such as Switzerland’s Sika, LafargeHolcim, Saint Gobain, GCP, RPM and Mapei are seen as potential suitors for all or parts of the business, as well as buyout groups such as Advent, Carlyle or CVC, Reuters reported previously. (Editing by Christopher Mangham)

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