BASF restructures Ciba businesses

C&I Issue 14, 2009

German chemical major BASF will cut 3700 jobs by 2013, in the wake of the Ciba acquisition, the majority of which will go by the end of 2010.

  In addition, 23 of the 55 Ciba production sites could be sold or closed, and 36 of the 70 Ciba research sites and sales and administrative offices will be consolidated. The Ciba integration will eventually cost BASF €550m, with €150m relating to 2009 activities. But BASF hopes to benefit from synergies of €400m/year from 2012, with savings of €300m by the end of 2010.

  The restructuring will make BASF a world leader in, among other things, coatings and paints, paper chemicals and water treatment chemicals.

  ‘This is unfortunately not good news for some of our employees,’ said BASF chairman Jürgen Hambrecht. ‘But, the combined businesses can be successful in the long term only if we optimise them and exploit the full potential for synergies. I promise all our employees that we will keep the period of uncertainty as short as possible and will make decisions in a fair and transparent way.’

  The numbers may seem big, says Constantine Biller, a chemical analyst at Clearwater Corporate Finance, but the synergies vastly outweigh the costs. BASF is ‘as expert as anyone’ in terms of ‘eliminating surplus capacity and fringe activities,’ following a major acquisition. ‘It is interesting to see BASF doing all it can to stay in Switzerland,’ he adds, commenting on the decision to maintain the strong presence Ciba has in the Basel region, albeit under a different name. ‘It shows this isn’t a slashand- burn job.’

  The other big players are engaged in similar processes. Dow, for example, is planning to cut 3500 jobs and close 10-15 sites following its acquisition of Rohm and Haas. However, key commentators have indicated that, with inventories now nearing more appropriate levels, executives could soon begin to slow production job losses. In addition, skilled production workers and R&D staff will probably be prized by companies hoping to win government stimulus money.

  Recent figures show that the chemical industry has been hit hard by recession. Preliminary US Department of Labour figures indicate that in June it employed 40,000 fewer people than it did a year ago, a decrease of 4.8%.

  The Ciba coatings effects businesses will be integrated into BASF’s dispersions and pigments division, which is organised as regional business units. The majority of Ciba’s water treatment activities will be integrated into BASF’s performance chemicals division, and a new strategy for the business is expected in 2010. Ciba’s home and personal care business will be absorbed into the existing structure of BASF’s care chemicals division. Plans for BASF’s new paper chemicals division and Ciba’s plastic additives business have already been announced (C&I 2009, 12, 13).

  BASF has also reorganised its petrochemical division, reducing the former six business units to four. New business unit Basic Petrochemicals Europe has taken over the businesses for cracker products, industrial gases and alkylene oxides and glycols in Europe, while acrylics, alcohols, solvents and plasticisers have been consolidated into another new business unit, Industrial Petrochemicals Europe. All the petrochemicals businesses in North America and Asia Pacific have been consolidated into two regional business units: Petrochemicals North America and Asia Pacific.

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