DIC, a Japanese company familiar to most people as the owner of Sun Chemical, is set to acquire BASF’s global pigments business known as BASF Colors and Effects, or BCE, in a deal valued at €1.15 billion. This includes €985 million in cash plus the outstanding debts.
BASF announced back in February that it would sell the pigments business as part of a strategic plan to divest itself of lower margin businesses. BASF is a large chemical company with multiple interests in chemicals, materials, industrial solutions, surface technologies, nutrition & care and agricultural solutions, employing roughly 122,000 staff worldwide. It recorded sales of around €63 billion in 2018. The pigments business employs some 2,600 people around the world with sales of approximately €1 billion in 2018.
In contrast, DIC, which is headquartered in Tokyo, Japan, has around 20,000 employees globally and generated sales of approximately 800 billion yen, or around €6.8 billion, in 2018. The company was founded in 1908 and is active in more than 60 countries. It’s split across three segments – Packaging & Graphics, Functional Products and Color & Display, which also includes a portfolio of pigments. DIC, which acquired Bayer’s pigments business in 2003, will use the acquisition to give it a bigger presence in the European market. There are over 30 pigment production facilities worldwide between DIC and BCE.
Kaoru Ino, president and CEO of DIC, commented: “We have outlined a clear growth path for DIC with the target to increase our sales to 1 trillion yen, i.e. approximately €8 billion, by 2025. In this context, BASF’s pigments portfolio is an important strategic addition in meeting our goals more expeditiously. It will allow us to expand our position as one of the leading pigment suppliers globally and offer our customers even more versatile solutions,”
Dr. Markus Kamieth, a board member of BASF SE who’s responsible for the Industrial Solutions segment, said that the company looked for an owner that would value the pigments as a core strategic business, adding: “DIC pursues ambitious growth plans and has announced to further develop the business in the coming years. We are convinced that the pigments business will be able to unfold its full potential within DIC.”
Yoshinari Akiyama, DIC executive officer and general manager of the Color Material Products Division, added: “The acquisition of BCE is extremely ideal within the DIC pigments business, due to the complementary regional footprint and product portfolio. It is a strategic partner for DIC who aims for high growth and high added value by expanding functional pigments into niche applications. By combining the technological capabilities of both companies, we will continue to create new value and provide it to the market as a leading company in the pigment business.”
The Swiss company Clariant also announced its intention to sell its pigment business back in January as part of a strategy to streamline the company. This business is valued at CHF 800 million, or roughly €735 million. Some analysts had expected a venture capital company to acquire the pigment businesses from both Clariant and BASF and to combine them into a single entity so the market appears to have been taken by surprise by the DIC move.
It’s worth noting that the pigments business has suffered a certain amount of turmoil in the last couple of years, with shortages pushing up prices. This has mainly been caused by changes to environmental regulations in China and better government enforcement.