BASF and LetterOne merge their hydrocarbon activities

BASF and LetterOne merge their hydrocarbon activities

BASF and LetterOne merge their hydrocarbon activities

/ Acquisitions / Monday, 01 October 2018 12:56

The German chemical company BASF has announced signing an agreement to merge its Wintershall hydrocarbon subsidiary with DEA, held by the Russian billionaire Mikhail Fridman's LetterOne fund.

The deal is expected to create Wintershall DEA, “the leader among independent production and exploration companies in Europe,” said Hans-Ulrich Engel, CFO of BASF, in a statement.

In 2017, Wintershall and DEA together achieved a turnover of 4.7 billion euros and a net profit of 740 million euros, says BASF.

If the deal gets the go-ahead from the competition authorities, BASF and LetterOne expect a mid-term IPO of Wintershall DEA. BASF will initially hold 67% of the new structure and LetterOne 33%.

Three years after the agreement, scheduled to be finalized in the first half of 2019, BASF expects synergies “of at least 200 million euros per year”.

As a result of the agreement, BASF has lowered its earnings guidance for 2018 and now expects an operating profit “well below” the 2017 level, compared to an expected “slight” decline.

BASF had announced merger discussions in November 2017, before signing a letter of intent with LetterOne in December.

The Rhineland group had already tried in 2015 to seize DEA, sold by the German energy company RWE, and finally won by the Russian LetterOne for 5.1 billion euros. The operation took a long time to take shape because of the British authorities' reservations to give the green light in the face of Western sanctions against Moscow.

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