BASF sells Coatings Division majority to create standalone company

BASF has reached an agreement with global investment firm Carlyle, in partnership with Qatar Investment Authority (QIA), to sell its Coatings Division. Upon closing of the transaction, Coatings will operate as a standalone entity.

The businesses include automotive OEM and refinish coatings as well as applied surface treatments for metal, plastic, and glass substrates in a wide range of industries.

BASF will hold a 40% equity stake and receive pre-tax cash proceeds of €5.8 billion at closing, which is slated for Q2 2026. The enterprise value of the transaction is €7.7 billion.

During an Oct. 10 conference call about the sale, BASF CEO and Board of Executive Directors Chairman Markus Kamieth said the company’s coatings business has everything it takes to win: “outstanding market positions, deep technical expertise, and trusted customer relationships.”

“We stay invested with a minority share because we believe in Coatings’ future value creation and upside potential — building on today’s success to shape an even stronger future,” he said. “The business is highly focused on automotive, including the collision repair aftermarket. In surface treatment, it also serves the aerospace industry and various additional industrial applications. These are large markets with high customer loyalty.”

When asked by Morgan Stanley how BASF will realize value moving forward with its 40% stake, Kamieth replied that the 40% holding is “a testament to our confidence in the business, in what the partner brings to the table, and in the business plan and the value creation potential for this business going forward.”

“As is normal with an investment fund or a private equity company, there is going to be an exit at one point in time,” he said. “Our hypothesis going in is that we will also jointly be working on this exit at some point. But other than that, everything else is speculation right now. But you can trust that we and our partner are clearly aligned on the value creation plan and on potentially creating the conditions for a joint exit.”

According to a press release published just before the conference call, BASF management will work closely with Carlyle, which will “support the future growth of the business through investing in its commercial capabilities, innovation pipeline, and organizational structure to enhance customer focus.”

The release adds that Carlyle will leverage its strong track record and extensive experience in successful carve-outs of industrial and chemical assets, following previous investments in Axalta, Atotech, and Nouryon.

Martin Sumner, Carlyle’s global head of industrials, and Tanaka Maswoswe, Carlyle partner, said they see compelling opportunities to leverage their global platform to support the business becoming an established independent leader, according to the release.

Anup Kothari, member of the Board of Executive Directors of BASF SE and responsible for the Coatings division, added that the transaction “opens a new chapter of opportunity for BASF Coatings, building on today’s success and shaping an even stronger future.”

Business continuity for customers will be ensured throughout the transaction process, and in accordance with legal requirements and local practice, employee representatives will be involved, the release states.

During the conference call, a representative of Bernstein Société Générale Group asked for details about BASF’s future value creation plan and governance over the Coatings business.

“Carlyle, as the majority shareholder, is the controlling party here and certainly has a very detailed value creation plan and business plan behind their bid for the business,” Kamieth replied. “This is not ours to look into or decide on. The value creation plan is theirs to deliver.

“With regards to governance, we have agreed that the future board structure of the joint venture will have a certain share of BASF representatives and a certain share of Carlyle representatives or Carlyle-nominated representatives. I don’t really know at this point in time how big the board will be, but the ratio will be the same.”

BASF automotive chemical recycling

Along with Porsche AG and Bioenergy and Sustainable Technologies GmbH (BEST), BASF has completed a joint pilot project for the recycling of mixed waste from end-of-life vehicles, according to a press release from Porsche AG.

The project found that high-performance plastics in automotive shredder residue — a mixture of shredded parts, such as foams, plastics, films, and paint particles — can be recycled. The companies believe that, in the future, a form of chemical recycling called gasification could serve as an alternative to the current thermal recovery process, converting mixed waste into new raw materials, such as for plastics production.

“Porsche aims to promote the circular economy in the manufacturing of its vehicles and has set itself the goal of increasing the proportion of recycled materials in its vehicles,” the release states. “Chemical recycling enables the processing of plastic waste that cannot be mechanically recycled for technical, economic, or ecological reasons.”

In the trial, a recycling process was conducted for the first time using automotive waste and bio-based raw materials, such as wood chips, in place of fossil-based materials, the release says.

Advanced gasification technology is used to convert plastic waste into synthesis gas at high temperatures. Within the BASF production network that integrates this synthesis gas, new plastic is produced for component manufacturers — a polyurethane formulation. As part of the pilot project, the formulation was used to create new steering wheels.

“Pilot projects like these allow us to evaluate how we can further develop the circular economy as a sustainability field at Porsche and how we can anchor chemical recycling in our strategy in the long term,” said Robert Kallenberg, Porsche AG’s head of sustainability, in the release.  “We are testing new recycling technologies with our partners in order to increase recyclate quotas, gain access to previously unusable recyclate sources, and evaluate new processes for waste streams that are currently being thermally utilised.”

Martin Jung, BASF’s Performance Materials Division president, added that the company offers a wide range of recycling solutions.

“We strongly believe that different recycling technologies have to add up to a wide spectrum to achieve recycling targets,” he said in the release. “We prioritize mechanical recycling and continuously improve its efficiency. The type of waste and the level of sorting determine which technology is most suitable. We are convinced that complementary technologies like chemical recycling are needed to deal with the remaining waste that is still incinerated today.”

The raw materials produced as a result of gasification are of comparable quality to conventional raw materials, the release adds. The companies state that the resulting products meet the requirements for high-performance plastics, and as such, are confident they can be used in safety-relevant components.

Images

Featured image credit: Victor Golmer/iStock

Chart and secondary photo provided by Porsche AG