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| BASF offer to Ciba gets lukewarm response |
| BS Reporter / Mumbai Sep 17, 2008, 00:37 IST |
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The world’s biggest chemicals company BASF’s $3.1-billion takeover offer for Switzerland’s ailing Ciba has received lukewarm response from Indian investors.
The share prices of Indian subsidiaries of both the companies were down on the Bombay Stock Exchange (BSE) because the market felt that the offer price was relatively high at a time of economic downturn.
“The deal would create a global leader in plastics additives and pigments. In India, we should see how the merged entity survives amid rising costs, intensifying competition and uncompromising clients. The question over the price BASF offered to Ciba is also seems to be unrealistic. At a 32 per cent premium to Friday’s closing price and 60 per cent premium to the average price for the previous 60 days it looks steep,” said a Mumbai-based analyst.
However, some analysts said that the takeover offer has not reflected on Tuesday’s share prices of both the subsidiaries in India.
Here, the market feels that specialty chemicals industry is squeezed by high raw material cost and rising logistics expense.
Another group of analysts pointed out that the multiple of 8.6 times 2008 earnings before interest, tax, depreciation and amortisation offered by BASF is in line with sector deals, and below the 11 times-plus that Dow Chemical paid for Rohm & Haas in July.
When contacted, both the company officials in India said that they were evaluating synergy benefits of integration, which the companies could enjoy in India.
At Tuesday’s share price Rs 260.15, down 1.63 per cent, on BSE, BASF India has a market capitalisation of over Rs 730. Ciba India, which was down 1.45 per cent and closed at Rs 244.65 a share, has a market cap of around Rs 325 crore.
BASF India, which begun its operation in 1943, is engaged in business of manufacturing and marketing of Styropor®, tanning agents, leather chemicals and auxiliaries, crop protection chemicals, textile chemicals, dispersions and specialty chemicals, plastics, automotive and coil coatings, construction chemicals, polystyrene and polyurethane systems. BASF Group in India has over 1300 employees.
Ciba’s board has supported the offer, which is expected to be completed in the first quarter of next year, and will recommend that shareholders accept it. Including Ciba’s net debt and pension provisions, the deal is worth $5.4 billion.
Adding Ciba, which specialises in plastics additives, coatings and water and paper treatment, will make BASF a world leader in plastics additives and in chemicals for paper, and number two in coating effects, from fourth in all three categories. The deal would boost earnings per share from the second year, said analysts.
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