BASF buys Albemarle's surface treatment business for $3.2 billion

By Ludwig Burger

FRANKFURT (Reuters) - Germany's BASF SE (BASFn.DE), the world's largest chemical producer, is buying Albemarle Corp's (ALB.N) surface-treatment unit Chemetall for $3.2 billion in cash, bolstering its automotive coatings business, the companies said on Friday.

The deal is BASF's largest since it acquired Cognis, a maker of ingredients for cosmetics and detergents, for 3.1 billion euros (2.44 billion pounds)including debt in 2010.

It is also the first major takeover under Chief Executive Kurt Bock, who has focused more on cutbacks and divestments during his five years in charge.

Albemarle said BASF paid 15.3 times Chemetall's most recent earnings before interest, taxes, depreciation and amortisation (EBITDA). BASF itself is trading at 7.4 times EBITDA and Albemarle at 13 times, according to Thomson Reuters data.

Bernstein analyst Jeremy Redenius said the deal looked expensive at these multiples.

"We worry this acquisition increases BASF's exposure to industrial Europe (50 percent of sales), which will struggle to grow, especially if the automotive industry slows," he said.

BASF shares, up 0.2 percent at 68 euros at 1406 GMT, lagged a 0.7 percent gain in the German DAX index (.DAX).

Frankfurt-based Chemetall is a global supplier of specialty chemicals used in surface treatment of metals and plastics.

It makes a major portion of its business from chemicals to protect sheet metal for cars against corrosion before up to four layers of coatings are applied on top.

The deal, expected to be wrapped up by year-end, will complement BASF's coatings division, which made 3.2 billion euros ($3.6 bln) in revenues last year and relies on automotive markets for the most part.

The German group, the world's largest chemicals group by sales, in February sold a business that makes industrial coatings for standard steel and aluminum bands to Akzo Nobel (AKZO.AS) for 475 million euros to focus its coatings unit more narrowly on automotive customers.

Chemetall was founded in the late 19th century as part of Frankfurt-based industrial conglomerate Metallgesellschaft. It was sold to Rockwood Specialties in 2004 and became part of Albemarle in 2015.

Albemarle said it was advised by Bank of America Merrill Lynch (BAC.N), while people familiar with the transaction said Citi (C.N) was BASF's financial advisor.

(Additional reporting by Arno Schuetze; Editing by Mark Potter and Susan Fenton)