Financial Times: BASF in talks to sell its Basell venture: “Shell has said it favours an outright sale of the unit, valued by analysts at €2.5bn-€6bn.” (ShellNews.net) 12 Nov 04

By David Firn in London

Published: November 12 2004

BASF yesterday said it was in talks to sell Basell, its petrochemicals joint venture with Royal Dutch/Shell, as it reported a sharp rise in third quarter profits.

The German group, the world's largest chemicals company by sales, said it was in talks with "several parties" over the 50-50 joint venture and would decide whether to go ahead with a third round of bidding by the end of the year.

Private equity groups and trade buyers are understood to be looking at Basell.

BASF and Shell put a for-sale sign on Basell in August, when they said they were reviewing the future of the joint venture, which is the world's number-one polypropylene manufacturer and Europe's leading polyethylene maker, with sales of €5.7bn ($7.4bn) in 2003.

John Feldmann, executive director, said Basell could also be floated in an IPO. Shell has said it favours an outright sale of the unit, valued by analysts at €2.5bn-€6bn. Both companies say they will dispose of their stakes by mid-2005.

BASF's net profit for the three months to September 30 was €337m, compared with €180.8 last year, and ahead of most analysts' forecasts despite higher than expected tax on its oil and gas activities. Earnings before interest, tax and exceptional items was €1bn, well ahead of even the most bullish forecast. Earnings per share rose from €0.21 to €0.62, boosted by a share buy-back.

Jürgen Hambrecht, chairman, said the successful first half of 2004 had run "seamlessly" into the third quarter, with no signs of the traditional summer lull in demand from manufacturing industry. Sales rose 20 per cent to €9.31bn as the company took advantage of strong demand to pass on a sharp rise in raw material and energy costs.

The strong results, which mirror a leap in profit at Dow Chemical, the largest US group, point to a strong industrial recovery.

Mr Hambrecht said he expected BASF to earn a premium on its cost of capital in 2004, with a significant increase in full year sales and earnings before interest, tax and exceptional items.

Analysts say the cyclical recovery in chemicals and plastics will peak in 2006-7 as the industry recovers from the longest recession since the 1970s. However, Mr Hambrecht warned that the industry, faced the risk of high energy costs and economic slowdown in 2005.

"Even if 2004 turns out to be a very good year for BASF, we need to keep an eye on the warning signals for our future development. All of you are aware of the negative factors: persistently high oil prices; the weak dollar; reduced consumption; sluggish growth, especially here in Germany; and virtually no improvement in regional crises," he said.