The Urethane Blog
October 13, 2025
GRACE MATTHEWS INSIGHTS
Fall 2025 Newsletter
Click the image to download the latest edition of Grace Matthews Insights
Market Update: Near-Term M&A Outlook is Improving
After recent market dynamics created uncertainty, business owners considering a sale are searching for ways to get comfortable when considering the timing of a sale process. Despite the year-to-date slowdown in M&A activity throughout the chemicals and materials value chain (largely due to uncertainty around global trade / tariffs), there are signs for optimism as we begin Q4 and head toward 2026. Market participants and leading indicators are pointing to an uptick in activity in the months ahead. For this edition of Grace Matthews Insights, we analyzed both market data and communications from industry executives to gauge recent conditions and the near-term outlook. The takeaways are encouraging.
The first half of 2025 was marked by a period of tariff-driven macroeconomic uncertainty that led many would-be sellers to hit the pause button on sale plans. Acquisitions (by deal count) of North American based chemicals and materials science companies declined more than 40% year-over-year. This occurred despite expectations for healthy levels of M&A activity as we entered 2025. We view this as a classic case of supply and demand imbalance. While many potential sellers of businesses (supply-side) stayed on the sidelines searching for clarity in market conditions and their own near-term outlook, potential buyers, both strategic buyers and private equity (demand-side), remain well-capitalized and eager to deploy capital.
We saw sequential improvement in transaction volumes in Q3 as conditions improved, and entering Q4, the tone throughout the industry is turning more optimistic. Based on our conversations with industry participants and a review of recent earnings transcripts from dozens of public company CEOs throughout the chemicals and materials industry, we note the following themes indicating where markets are at today and where they may be headed:
- Temporary Slowdown in M&A is Bouncing Back – The climate of uncertainty in the first half of the year caused many transactions to pause or delay as sellers waited for more clarity. This has started to turn, and deal activity is becoming more robust
- Earnings Remain Healthy as Tariff Effects Have Been Hit or Miss – Despite the uncertainty, earnings remain steady. Tariff announcements and subsequent pauses / trade agreements have directly impacted some markets more than others, but companies are adapting quickly
- M&A Remains a Priority, and Strategic Buyers are Well-Capitalized – Corporate acquirers are ready to deploy capital, with a focus on smaller and highly synergistic “bolt-on” deals. Balance sheets remain strong, with average public company Net Debt to EBITDA ratios hovering at comfortable levels around 2.0x
- Incentives to Invest in the U.S. – Tariffs and an overall healthy economic environment relative to other geographies are creating incentives for reshoring and foreign acquisitions of U.S. companies
- Private Equity in Need of Exits – The average duration of current private equity investments is the longest it has been in at least ten years, increasing pressure to realize investments (i.e., to sell or ‘exit’) and return capital to investors
- Emerging Trends Driving Future M&A – Tailwinds to watch in the coming quarters that could accelerate M&A include interest rate reductions, massive investments in infrastructure to support AI, and the ripple effects of China’s anti-involution policy on cross-border trade
Below, we expand on these themes by combining insights from industry executives and analyzing key market trends.
An Underwhelming First Half as Would-Be Sellers Hit Pause
Announced transactions in Q1 and Q2 2025 were off significantly from the same period in 2024. Acquisitions of North American chemicals and materials science companies declined over 40% during this period.
This came as a surprise to many forecasters (including Grace Matthews) who less than a year ago were anticipating a strong level of M&A activity in 2025, as interest rates were widely expected to continue to fall early in the year and a new administration, expected to be more pro-business, was set to take office. Needless to say, much has changed in the last twelve months.
A key driver of the change in sentiment and resulting reduction in M&A volumes was the uncertainty created by U.S. and retaliatory tariffs. After the April 2nd “Liberation Day” tariffs were announced, many potential sellers chose to focus on securing supply chains, implementing pricing initiatives, and assessing how customer demand might be impacted. As a result, the prevailing sentiment in the first half of the year was to “wait and see,” hoping that improved visibility and financial performance could lead to higher valuations (and more deal certainty) in the future.
Figure 1: Announced acquisitions of North American chemicals and materials science companies. Source: Capital IQ & Grace Matthews
Earnings Remaining Stable and M&A Outlook is Improving
Fortunately, much of the negative sentiment and uncertainty has begun to subside, and activity has been increasing. As shown in Figure 1, M&A volumes rebounded in Q3 2025 and were on par with Q3 2024. Despite the tumultuous tariff environment over the past several months, the overall chemicals and materials sector has navigated the situation quite well. Many industry participants were well prepared, perhaps because the last few years of industry shocks have hardened the chemical sector’s collective capability to weather uncertainty (few have forgotten the COVID shutdowns, Texas freeze, supply chain shortages and inflation, and freight cost increases). When tariffs were enacted, companies took action quickly and creatively in efforts to mitigate their impact. Where necessary, companies have shifted trade flows to domestic or lower tariff sources, substituted away from disadvantaged raw materials, optimized inventory levels, and taken selective pricing actions. Due to these actions, effects have been largely secondary for many companies, though select sectors with greater exposure to foreign-sourced materials have seen more meaningful direct impacts. In our opinion, managers in the chemicals and materials sector have never been performing better, and they have had to considering the challenges they have faced.
On net, many companies in the Grace Matthews Chemicals & Materials Index posted reasonable financial results through the first half of the year. As highlighted in Figure 2, the number of companies posting year-over-year EBITDA growth in Q1 and Q2 was consistent with 2024 (hovering around 55-60% of companies). Interestingly, though not surprisingly, the number of companies posting revenue growth jumped significantly in Q2 2025, as companies quickly pushed through price increases as tariffs took effect. Prior to that, the majority of companies dating back to the beginning of 2024 had been posting revenue declines, indicating overall softness in the market.
“Many of the headwinds are merely delays […] underlying drivers of long-term growth remain strong.”
– Christian Koch, CEO, Carlisle Companies
Figure 2: Percentage of companies in the Grace Matthews Chemicals & Materials Index with year-over-year growth in Revenue (left chart) and EBITDA (right chart).
Long-Term Fundamentals Remain Healthy, Multiple Drivers of Investment in the U.S.
On the topic of acquisitions, strategic buyers have remained committed to M&A, as investor pressure to demonstrate growth is ever-present. Sluggish organic growth in many markets tends to put even more pressure on large companies to pursue M&A. Numerous executives have recently cited that their M&A pipelines remain robust, with a focus on disciplined capital deployment. While buyers are cautious about large-scale, transformative “bet the farm” acquisitions, they are eager to invest in smaller bolt-on deals. Key areas of focus include targets with obvious synergies, those that grow market share in high-value end markets and geographies, expand capabilities, and opportunistic investments that arise when market dislocations occur.
Enabling these investments, balance sheets and availability of capital have remained quite healthy. Net Debt to EBITDA ratios are hovering just under 2.0x for the Grace Matthews Chemicals and Materials Index, in line with historical averages. As a rule of thumb, Net Debt under 4.0x EBITDA is manageable, and many public companies unofficially aim to stay at 3.0x or less to preserve flexibility. If borrowing costs decline, as some predict they will in the coming quarters, it will also help private equity buyers, who typically rely more on leverage than strategic buyers do to finance acquisitions.
One aspect of the current environment that should not be overlooked is the incentives U.S. tariffs are creating for both reshoring of manufacturing and for international buyers to seek investments in the U.S. Michael Battles, Co-CEO of Clean Harbors, commented during their second quarter earnings call that “reshoring is no longer a headline. It is becoming a funded reality.” We are seeing this play out in several of our recent and ongoing projects. Two of our closed engagements earlier this year involved a U.S.-based business that was acquired by an international buyer (one headquartered in Germany and another in India). In both instances, the acquirers had a limited presence in the U.S. and were seeking to establish a manufacturing footprint. The current environment only seems to be accelerating the growth in cross-border M&A that has been on the rise in recent years.
“Reshoring is no longer a headline.
It is becoming a funded reality.”
– Michael Battles, Co-CEO, Clean Harbors
Private Equity in Need of Exits
Another driver of near-term activity is the growing backlog of private equity investments. According to Pitchbook, the median holding period for private equity backed companies in the U.S. is now up to 3.8 years, the longest it has been in at least 10 years (see Figure 3). The acceleration from the end of 2024 to June 2025 is quite remarkable and another indicator that very few private equity firms exited investments in the first half of the year. It’s obvious that private equity firms have viewed market conditions for selling a business as sub-optimal in recent years. However, the upward trend we’re seeing will have to reverse at some point as pressure to return capital to investors grows. We are already seeing and hearing of an increasing number of private equity platforms being brought to market as we approach the end of the year.
Figure 3: Median holding period for U.S. private equity backed companies. 2025 data as of June 2025. Source: Pitchbook.
Other Trends Driving Future M&A
Another noteworthy development is the artificial intelligence boom. Serving this rapidly growing market requires huge investments, almost all of which require chemicals and materials inputs. Take, for example, Microsoft’s latest AI data center in Mt. Pleasant, WI called Fairwater. The site spans 315 acres, has a staggering 1.2 million square feet under roofs, 46 miles of deep foundation piles, 120 miles of underground cable, and 72 miles of mechanical piping. The inputs required to build and maintain something like this are almost too long to list: building products and construction chemicals for foundations and structures, metals and metal treatment chemicals for steel piping and structures, water treatment and refrigeration chemicals for cooling towers, fire suppression systems, diesel fuel and lubricants for generators, cleaning chemicals for server rooms to reduce static and prevent dust buildup, to name just a few. This phenomenon has and will continue to provide a boost in demand for companies serving these markets for years to come. Longer term, AI infrastructure will also create competition for electricity, raising potential issues for other energy consumers, including chemicals and materials manufacturers.
Other factors that can influence business owners’ confidence in launching sale processes include interest rates, consumer confidence, and housing starts. In the longer-term, we are also monitoring factors impacting cross-border trade and global production capacities. Specifically, as a result of higher U.S. tariffs on Chinese imports, many European companies allege that they are seeing an influx of Chinese producers dumping products into their markets. Yet another long-term variable is the potential ripple effects of China’s anti-involution policy, the Chinese government’s agenda to reduce overcapacity and price wars by promoting an orderly exit from outdated capacity. This will take time for its effects to be felt but could have positive implications for higher cost of production North American and European producers in markets threatened by low-cost Chinese suppliers. If meaningful capacity truly is taken out of some markets, this could provide a strong tailwind for Western producers.
Figure 4: Aerial view of Microsoft’s new AI datacenter campus in Mt. Pleasant, WI.
Looking Ahead: A Reason for Optimism
So what do we expect as we look ahead? In short, we are optimistic that M&A activity will accelerate over the coming 12-18 months. We see more factors pointing potential sellers to launch sale processes than those causing them to continue to wait. The fundamental drivers of M&A in chemicals and materials remain intact. Amid all the uncertainty throughout 2025, companies have proven to be quite resilient, despite slower organic growth. Large strategic buyers need acquisitions for growth. If anything, slower organic growth has made acquisitions even more important as growth catalysts. Likewise, private equity’s appetite for deals is not going anywhere, and they will increasingly turn to becoming sellers as they work through their growing backlogs.
Grace Matthews Chemicals & Materials Index (EV / EBITDA Multiples)
The Grace Matthews Chemical & Materials Index tracks the Enterprise Value / EBITDA ratios (“EV / EBITDA multiples” or “EBITDA multiples”) of ~100 publicly traded chemicals & materials companies that span multiple sub-sectors and geographies. The Index aggregates the latest reported financial data and stock prices and tracks valuation trends and operating metrics across different industry sectors. Index averages are equally weighted, as opposed to weighting by market capitalization.
Source: Capital IQ & Grace Matthews analysis.
Select Recent Chemicals and Materials Science Transactions
| Closed Date | Acquirer / Target | Target Description | Enterprise Value (EV) | EV / Sales | EV / EBITDA |
|---|---|---|---|---|---|
| Transaction values in $US millions | |||||
| Pending | Berkshire Hathaway / OxyChem | Producer of commodity chemicals, including chlorine, sodium hydroxide and others used for water treatment and healthcare | $9,700 | ||
| Pending | Givaudan / Belle Aire Creations (Rock Island Capital) | Full-service fragrance manufacturer | |||
| Pending | Advanced Drainage Systems / National Diversified Sales (sub. of Norma Group SE) | Manufacturer and supplier of water management, drainage, and stormwater solutions | $1,000 | 3.2x | 16.1x |
| Pending | Kemira / Water Engineering (Nolan Capital) | Provider of water treatment chemicals, consultation, and services | $150 | 2.5x | |
| Pending | Hivest Capital Partners / Novasol Chemicals | Global specialty chemicals distributor | |||
| Pending | Chemtrade / Polytec | Provider of turnkey water treatment solutions | $150 | 6.5x | |
| Pending | Avery Dennison / Business of Meridian Adhesives Group (American Securities) | Manufacturer of specialty adhesives for the U.S. flooring industry | $390 | 3.5x | |
| Pending | Solenis (Platinum Equity) / NCH Corporation | Manufacturer and distributor of industrial, commercial, and institutional maintenance products and services | |||
| Pending | Gemspring Capital / Goodyear Tire & Rubber (Polymer Chemicals Business) | Producer of synthetic rubber, primarily serving the automotive aftermarket space | $650 | 0.7x | 5.0x |
| Oct-25 | Arclin / Polymer Solutions Group (The Jordan Company) | Manufacturer of proprietary and custom polymer additives, dispersions and release agents | |||
| Sep-25 | Hydrite Chemical / Enterprise Specialty Products | Provider of foam control products | |||
| Aug-25 | Mason Wells / Calvary Industries | Manufacturer of metal pretreatments, cleaners, water treatment, and process chemicals | |||
| Aug-25 | Hawkins / StillWaters Technology | Distributor of water treatment chemicals and equipment | |||
| Aug-25 | SNF Group / Obsidian Chemical Solutions | Provider of specialty chemical solutions primarily for completion operations in the oil and gas industry | |||
| Aug-25 | Blue Sea Capital / MicroCare (Heartwood Partners) | Provider of branded consumables for non-discretionary precision cleaning applications | |||
| Jul-25 | South Coast Terminals / Lindau Chemicals | Manufacturer of specialty organic chemicals including advanced epoxy curing agents, promoters, and solvated organic copolymers | |||
| Jul-25 | Velocity Rail Solutions (Wind Point Partners) / Liquid Tech Solutions (Lindsay Goldberg) | Provider of route-based, mobile on-site refueling services to a diverse set of mission critical end markets | |||
| Jul-25 | Truelink Capital / Zep (New Mountain Capital) | Manufacturer of cleaning and maintenance products | |||
| Jul-25 | Pritzker Private Capital / Buckman | Specialty solutions provider for water treatment and industrial processes | |||
| Jun-25 | Aditya Birla Group / Cargill (Specialty Chemicals Business) | Manufacturer of formulated resins, curing agents, reactive diluents and polyaspartic resins | |||
| May-25 | Peninsula Polymers / Rodaj | Distributor serving the CASE, Packaging, and Specialty markets | |||
| May-25 | Hasa (Wind Point Partners) / Clearwater Chemicals | Texas-based water treatment provider for commercial and recreational pools, competitive aquatic systems, and water cooling tower systems | |||
| Apr-25 | Bertram Capital / Applied Adhesives (Arsenal Capital) | Distributor and manufacturer of adhesives for the packaging, product assembly, paper converting, and automotive markets | |||
| Apr-25 | Quaker Houghton / Dipsol Chemical | Supplier of surface treatment and plating solutions | $153 | 1.8x | 10.5x |
October 13, 2025
Surprise move by China carriers ahead of U.S. port fees
Weak demand sees trans-Pacific container rates fall by double-digits.
· Wednesday, October 08, 2025
It took China a generation to ascend to the top of the global maritime sector; it won’t take nearly that long for that country to brush off expensive U.S. port fees on its ships.
Cosco, China’s flag carrier and the world’s fifth-largest container line, and subsidiary Orient Overseas Container Line (OOCL) of Hong Kong said that they won’t levy surcharges to offset the fees on Chinese-built and operated ships calling U.S. ports to be implemented Oct. 14.
While other liner operators scramble to drop calls and shift some of their China tonnage, Cosco advised customers in the U.S. that it plans no changes to services ahead of the punitive fees formulated under the authority of the United States Trade Representative.
“It seems unlikely shippers will experience much of an impact once the new law takes effect,” said Judah Levine of analyst Freightos, in a note to clients.
The fees, which escalate in the coming years, could cost Cosco and OOCL as much as $2.1 billion in 2026, analysts say, but could be absorbed by subsidies from Beijing.
The ship tax, which aims to blunt China’s maritime dominance and boost American shipping and shipbuilding, charges China-owned or operated ships $80 per net tonnage for each voyage to the U.S. Non-Chinese operators will be charged the greater of $23 per net ton or $154 per twenty-foot equivalent unit (TEU) capacity. The fees apply up to five times annually per vessel; roll-on/roll-off (ro-ro) vehicle carriers will pay a rate of $14 per net ton. The fees increase by $5 per ton annually until April 2028.
The fees must be paid in advance of arrival via the Treasury Department’s Pay.gov platform, and vessels must show proof of payment or risk denial of entry or cargo operations at U.S. ports.
Beijing for its part in late September passed new maritime laws that allow it to levy its own retaliatory port fees, and bar access to ports and data for vessels from countries that discriminate against China.
“American lines such as Matson, and U.S.-flagged vessels make up a modest share of trans-Pacific volumes,” said Levine, “so this kind of response may not have an outsized impact, but does represent an escalation as the deadline approaches.”
Trans-Pacific spot container rates continued to fall following the Chinese Golden Week holiday. The Freightos Baltic Index saw Asia-U.S. West Coast rates drop 16% to what Levine termed “a possibly loss-making” $1,554 per forty foot equivalent unit (FEU). Prices to the East Coast fared worse, off 18% to $3,260 per FEU.
Asia-Europe settled at $2,000 per FEU, down 9%, and Asia- Mediterranean prices fell 6% to $2,217 per FEU, “with all these lanes at least 60% lower than this time last year and at or near their lowest levels since just before the start of the Red Sea crisis almost two years ago,” Levine said.
“That rates are falling to this degree while Red Sea diversions are still in place suggests that capacity growth is a big factor in lower rates across the industry,” said Levine, “with the eventual end of the war in Gaza primed to release even more capacity back into the market.”
Ocean container lines introduced approximately 1.18 million TEUs of new container shipping capacity in the first half of 2025, according to analyst Xeneta, up 3.8% from a year ago.
Whether general rate increases planned by carriers for mid-October hold could depend on capacity adjustments through blankings and service suspensions. October shows 67 sailings cancelled from China to the U.S. and 71 on the westbound trade, according to project44, higher than early-Covid levels.
October 12, 2025
INTERVIEW: US mattress market is recovering from H1 lull
Al Greenwood
07-Oct-2025
ST LOUIS (ICIS)–US production and sales of mattresses have started recovering during the second half of 2025, the CEO of Carpenter said on Tuesday.
The recovery started during the Fourth of July holiday, and it has persisted through Labor Day in September, said Brad Beauchamp, CEO of Carpenter, a US producer of polyurethane foams and polyols as well as mattresses under its Casper Sleep business.
Beauchamp made his comments in an interview with ICIS on the sidelines of the Polyurethanes Technical Conference, hosted by the Center for the Polyurethanes Industry (CPI).
Part of the rebound reflects the surge in imports that took place prior to the imposition of tariffs from the US, he said. The market has since worked down those imports.
Tariffs could also be boosting domestic market, given the cessation of the de minimis exemption.
The recovery in demand for mattresses is happening from a low base, Beauchamp said. Earlier in the decade, demand had fallen following the surge of buying that happened during the COVID-19 pandemic.
The slowdown in housing sales further depressed demand. Consumers tend to buy bedding when they move, and fewer home sales mean that consumers are moving less.
US house construction remains slow, and economists do not expect a recovery until the end of 2026.
Furniture demand is still struggling, Beauchamp said. Imports had not increased to the same extent as those for furniture, so order patterns were less volatile than those for mattresses.
At times, domestic furniture plants are operating under shortened work week, Beauchamp said.
Together, furniture and mattresses make up 35% of demand for polyurethanes, making them the largest single market, according to ICIS.
CARPENTER SEES EARLY SIGNS OF FUTURE FURNITURE RESHORING
Furniture producers have started making inquiries that could lead to some companies’ reshoring their production to the US, Beauchamp said. While furniture is labor intensive, its bulk and shape make it difficult to ship overseas.
Reshoring interest started before the recent US tariffs because of a series of logistical disruptions caused by bad weather, the COVID-19 pandemic and low water levels at the Panama Canal.
Ashley Furniture is expanding capacity in Lee County, Mississippi, state, according to a mid-2024 announcement by the Mississippi Development Authority.
Recent US tariffs have strengthened this larger trend.
There have been fewer inquiries to reshore mattresses because they are easier to ship, Beauchamp said.
TARIFFS DISRUPTIONS DUE MOSTLY TO UNCERTAINTY
The effects that tariffs have had on Carpenter are mostly due to the uncertainty they have created among businesses and consumers, Beauchamp said.
Like many companies, Carpenter has seen few direct effects outside of isolated ones such as textiles for mattress covers.
The Polyurethanes Technical Conference runs through Wednesday.
Interview article by Al Greenwood
October 9, 2025
BASF SE (BASFY) Capital Market Update 2025 (Transcript)
Oct. 03, 2025 8:46 AM ETBASF SE (BASFY) Stock, BFFAF StockBASFY, BFFAF
BASF SE (OTCQX:BASFY) Capital Market Update 2025 October 2, 2025 3:00 AM EDT
Company Participants
Stefanie Wettberg – Senior Vice President of Investor Relations
Markus Kamieth – CEO & Chairman of the Board of Executive Directors
Dirk Elvermann – Member of the Board of Executive Directors, CFO & Chief Digital Officer
Ramkumar Dhruva – President, Monomers
Martin Jung – President, Performance Materials
Thomas Kloster – President, Petrochemicals
Mary Kurian – President, Care Chemicals
Markus Kamieth
CEO & Chairman of the Board of Executive Directors
Yes. Thank you, Stefie. And also welcome from my side here in Antwerp. Somebody’s phone is ringing. I hope that’s good news. So let me — first, a few introductory comments. First, you have seen a small video to kick us off today. You might — some of you might remember the words that were said in the video. This was also the video we kicked off our Capital Markets Day with last year, roughly 1 year ago. However, this time, we underlaid it with some pictures of our event from last year where we had our kickoff event with our executive team in Copenhagen last year. And the voices were also real BASF managers, underlining again what the essence of our strategy was, and this was this creating a winning spirit, our winning ways going forward. So I thought it’s a nice kickoff today.
And of course, we are here to give you an update 1 year into the new strategy where we are. And we also today want to distinctively take a closer look at our core businesses because since last year, since we differentiate in our portfolio steering between stand-alone and core businesses, we’ve spent a lot of time talking about the direction of travel for our stand-alone businesses, and I will also give you an update on this today. But of course, we want to today focus on the core businesses and what better place to do this than in Antwerp.
Antwerp is, as you have seen, maybe on the one or the other side, a very proud site. It has a motto that I will not try to pronounce this in Flemish, but it is something like, [Foreign Language], something like this. And this translated means something like the coolest site in chemicals. And you will see today that this has some merit to it. It’s really a very cool site and a very successful site.
So why are we in Antwerp today has a lot of good reasons for it. First of all, it’s, of course, a strategic relevance of Antwerp, not only for the chemical industry, but particularly, of course, for BASF. It is the second largest Verbund site of BASF Group in the world. And it is a site that really symbolizes the concept of integration at Verbund very well. For example, it’s one of the highest integration — has one of the highest degrees of energy integration of any chemical site in the world. And I think at least in some parts of the year when the temperature is not too extreme, the site, for example, is energy neutral. So you don’t have to have any steam production here on site because the energy integration is so well. And you will see this later on.
It is, of course, a strong footprint for our core businesses. All our 8 core business units or operating divisions are present here in the Antwerp site and the 4 divisions that are going to be highlighted today along the 2 major value chains that we will discuss today are, of course, big asset owners here in Antwerp. And the site was built 60 years ago and 40 — roughly 35 years ago, roughly, we started up the steam cracker here in Antwerp. And it’s still until today, Europe’s largest steam cracker and will also stay Europe’s largest steam cracker for quite some time, I would guess.
We have, as I said today, the opportunity to take a look at 2 of our major value chains here in Antwerp, the polyurethane and the EO value chain, just to show you a little bit how we think about our value chains, their value, their characteristics and why this matters so much to us. And of course, Antwerp in itself has, of course, a lot of advantages. For example, being close to one of Europe’s most, let’s say, capable, most powerful. I don’t know whether it’s the biggest, but certainly for chemicals, one of the most important ports and has an excellent location. And what you can also see here in Antwerp is sustainability in action. As I said, high energy integration and a lot of ideas how to drive the green transformation, which is so important to us and our industry along the lines that we have described in the strategy here, you can all see this in action. So this is why we’re in Antwerp today, and you can experience later also in the site tour, the coolest site in chemicals.
So as I said, Winning Ways strategy, we have launched this last year, roughly 1 year ago. And I think it’s fair to say that we set a new course for BASF to get BASF on its winning ways for the future, and we focus predominantly on the topics of portfolio steering, capital allocation and also establishing what we call a performance culture or winning culture in BASF. So that was the start a year ago. And I think when you reflect or when we reflect 1 year back, first of all, I have to say also with all the things that happened over the last 12 months, and it has not been the most steady time in the world, as you know, we still, from today’s perspective, think we have picked exactly the right topics to transform, to initiate change and to focus on in the course of the strategy.
So despite all the macroeconomic developments that we have seen, we stay very convinced that we have picked the right strategy and also the areas that we picked as focus areas are the right ones. And we will show you today that we are making significant progress also on implementing our strategic initiatives for the strategy implementation despite all the headwinds that we are seeing currently in our markets. And we are just increasing our appetite to focus even more on self-help measures, and we will talk about this later that in the current environment in the chemical industry, this is absolutely key.
Stefanie Wettberg
Senior Vice President of Investor Relations
Welcome back, ladies and gentlemen. With me on stage are Ramkumar Dhruva and Martin Jung.
Ram has been responsible for the Monomers division since 2019. He joined BASF in 1996. Yes. After earning a doctorate in Organic Synthesis, Photo and Electro Chemistry from the Indian Institute of Technology, Madras. He has managed businesses in various industries across different regions, driving innovation, sustainability and operational excellence.
Martin has been responsible for the Performance Materials division since 2019. He joined BASF in 2000 after receiving a PhD in polymer chemistry from Eindhoven University of Technologies in the Netherlands. He has managed businesses across different regions and sectors and has had a particular focus on the automotive industry for the last decade.
So with that, Ram and Martin, the floor is yours.
Ramkumar Dhruva
Thank you, Stefanie. Ladies and gentlemen, it’s a great pleasure for Martin and I to present to you our polyurethane value chain in BASF.
We chose this picture on the title side for a few reasons. This was taken a couple of weeks back close to New Orleans Port. And this depicts one of the modules of our MDI expansion in Geismar. And as you see, this is in the final stages of implementation, and this also shows that we are investing in the future.
We are also doing things in a new ways. As you can see, this is the first modular MDI plant of BASF, and we are reinventing ourselves. By doing so, we would like to keep the project in time and on budget. As we ship BASF as we are, we are also on the move, and we are making progress. Yes, perfect picture to start our presentation on polyurethane value chain in BASF.
In the next slide, you will see the segments of BASF, the four segments of core of BASF. And within that, when today’s presentation for us in terms of polyurethane, our polyurethane value chain is divided among the two operating divisions, Monomers and Performance Materials. Together, this comprises of Materials segment.
For us, in Monomers, our focus is on having broad portfolio of basic monomers and polymers. Within the polyurethane value chain, we would like to focus on big volume isocyanates with a clear emphasis on cost competitiveness and sustainability. Martin?
Martin Jung
Yes, ladies and gentlemen, in the Performance Materials division, we offer 6,500 mostly tailor-made products along the product lines of polyurethane systems, our topic today, thermoplastic polyurethanes, engineering plastics and a couple of specialty products.
Now our customers, they expect from us that, first of all, we understand the application that we can help them solving their issues and certainly always offering a competitive price. So for instance, if we develop a crash absorber with one of our customers in the automotive industry, they expect from us that we give consultancy in the material choice but also in the processing choice, testing, simulation and eventually, the crash absorber has to work in a car, and we all rely on the functioning crash absorber.
So it is rather a big know-how that we have to bring to our customers. The business is know-how heavy, people heavy. And therefore, half of our 7,700 people are working actually in the front end. That means in sales, technical sales, marketing, tech development and R&D. So pretty heavy on people and know-how.
Sustainability is a big topic for both of us as it is in the entire plastics industry. And we will talk about this in more detail for the polyurethane value chain because it is a complicated thing in sustainability in the polyurethane value chain. And I think we have good examples how we tackle it, both from the energy product carbon footprint side as well as from the circularity side.
As Markus has shown this morning, the Materials segment is rather substantial for the core. It is 30% of the core. Last year, EUR 13.5 billion of sales, half-on-half between our divisions. And actually, the lifeblood between our divisions, that’s the polyurethane value chain that makes up 50%, 50% of both our divisions. So you see how Markus phrased it yesterday, both our divisions are connected at the hip, especially through this polyurethane value chain.
Both of us command pretty good market positions in this. You see here on the right-hand side on the Performance Materials side, our main franchises and the market shares on the left-hand side, Monomers. You see for us in polyurethanes, this is 26% in sales of the entire segment. And we have worldwide a #1 market position in polyurethane systems. Mainly in the Western markets, higher market shares above the 20s in Europe as well as in U.S. and then lower market shares in the countries outside of China and lower again in China, which is a very big, big and competitive market.
If you look at the competitors, you will see those are the same names that you will also find in the Monomer scene, the same names, but the market is a different one. If you look at the systems market, it is around about 60% that is commanded by the big 5, whereas still there is 40% and mainly this 40% happen in Asia of a market that is also penetrated by a lot of smaller system houses that buy a lot of these raw materials in the market and then formulate for their customers. So while you find the same competitors, it is a different market.
Ram, how does it look like in the Monomers?
Ramkumar Dhruva
So yes, as Martin alluded to, we have both in Monomers division and Performance Materials market leadership in our respective individual market segments. When you look at one of the big segments of our Monomers division, which is isocyanates, with 29% of our sales derived out of this segment, we have a leading market position in MDI being global #2. And in terms of TDI, we have top 3 positions.
It’s not only on isocyanates. When you look at a broad portfolio of Monomers, when you move to polyamide 6 or in organics, we have a leading market position in the respective markets we serve.
When you look at the global footprint of our materials segment, for Monomers division, key essentials are in terms of back integration, economy of scale, competitive utilities and site structures is very critical. But it’s also not that, but it’s also to be close to our customers in their respective regions is very important for a robust, reliable supply chain, low logistics costs and at the same time, our ability to react to market changes and customer demands quite fast. With that, monomers operates its isocyanate assets in most of the key regions and integrated sites.
For example, here, in North America, we operate our isocyanate plants in Geismar. In Europe, we operate our isocyanate polyurethane assets in Ludwigshafen and in Antwerp. In Asia, in China, we have our isocyanate assets in Shanghai and in Chongqing and in rest of Asia, in Yeosu, Korea.
With this, we are the global player among all isocyanate producers, where we have all assets in all key regions, even in Asia, inside China, outside of China. With this global presence as well as we would say, Martin, we have a reasonable in terms of sales structure across all regions.
Martin Jung
Indeed, like you see that the biggest sales for both of us is Asia. So that is a little bit also unusual if you compare that to an entire scheme of BASF. We have 40% of the value chain is in Asia, followed by a strong position in Europe and obviously, North America, then South America is by far a smaller market with this 3% here for us.
Now compared to the Monomer setup, we follow obviously the supply, but our asset structure is a totally different one. We have 26 system houses worldwide. And for us, the proximity to the customer centers, to the manufacturing centers of our customer is the most vital thing. Therefore, you see so many. Then you would say 26, goodness me, is that operational excellence? Yes, yes, it is. Because for us, it is always a kind of a consideration between supply chain, being close to the customer, at the same time, having scale and efficiency in our system houses. And that is a balance that we have to strike every day. This is why we have also closed four system houses in the last couple of years in Russia, Middle East, also two in Europe. And that is an exercise that is also ongoing. We’re challenging our setup wherever it is every day to strike the balance between operational excellence and supply chain proximity to customers.
But it is not only the supply, it is also the know-how that you have to bring to the customers. Therefore, you see here also R&D centers as well as, we call it, creation centers. Those are cooperation centers where we interact with designers and many people from our customers. So it’s not only the assets and the material, but also to have the people, the know-how and the right technical service at place in order to win projects and in order to convince customers and bind customers.
So perhaps if you look in the future, as we also talked about CapEx and asset development, we would also say that we have enough assets in place, 26 sizable number. And going forward, we can actually accompany any growth in the market by, number one, just putting people in the plant. That is what you do in these downstream plants or you just incrementally increase the capacity of our plants. So both is possible, and both is actually rather low budget. And actually, both of it will be in the next couple of years, definitely below the depreciation that Dirk and Markus have shown this morning.
So we are prepared for the future. But perhaps let’s dive a little bit deeper into the chemistry that you will also later today see in the real assets. Ram, it starts with basic chemistry.
Ramkumar Dhruva
Yes, as was looked at this morning, Markus showed us different value chains. Within Monomers division, we start with our basic chemistry. We have nitrogen, sulfur and chlorine, and we start building our value chain. When you look at the polyurethane value chain for our downstream customers as well as third-party customers, we are the key raw material supplier with MDI, TDI and also PO.
We run our — as I said, we run our key isocyanate assets in all the integrated sites globally. And with these value chains, we build our polyurethane downstream products for internal as well as external customers. Out of this, 25% of our sales is derived from transfers to the downstream division, which is Performance Materials. But we have also a significant portion of our third-party sales, 75% of Monomers sales is derived from third-party customers globally across all regions.
And our focus to be successful for both internal customers as well as for our third-party customer is to have a cost competitive asset and also having high asset utilization and effectiveness and with a focus on sustainability. Martin?
Martin Jung
Yes, building on these building blocks and molecules, we start to formulate our formulations. So the main raw materials are the isocyanates, MDI. It is also propylene oxide that ends up in Polyols. And it is also adipic acid, not on this chart, different value chain, adipic acid that goes into polyesters and then later on also into systems.
So 50% of the raw materials in our polyurethanes value chain, 50%, we take from our brothers in the upstream division and then start to formulate. Polyols is the differentiating factor in the polyurethanes system. So we have around about more than 100 Polyols that we build on propylene oxide, then also polyesters, then we start to formulate and bring the polyurethanes systems to the market.
Also, thermoplastic polyurethane is built on the same kind of chemistry, a little bit of different processing. And also Cellasto, one of the specialties I will talk about a little bit more in detail later on, is also building on the same kind of chemistry.
So again, for us, it’s about the application know-how. It is about the differentiation, understanding the application and being ready to formulate exactly for that. Now perhaps let’s have a bit of a deeper look in what MDI is all about.
Ramkumar Dhruva
Thanks, Martin. So ladies and gentlemen, in the next few slides, we will dig a little bit deeper on the key value chains of the building block of polyurethanes.
Let’s start with MDI. MDI, methylene diisocyanate is a versatile product, and it is growing. When you look at the applications, it is in wide applications with people’s lives where it touches. It’s in the construction industry, it is in the automotive industry. It’s also in consumer industry, whether it is in the textiles or in footwear or in appliances.
The market is generally growing across all regions, specifically in China in the last years, and this market continues to grow above GDP. When you look at in 2024, the global market of MDI grew close to 300,000 tonnes. And in the last 5 years, the market grew more than 18% in total. When you look at this MDI market globally can absorb one world-scale capacity every year as long as this continues to grow.
And when you look at the main growth, as I indicated, is in Asia, specifically in China, but we expect Europe as well as North America, as was highlighted by Markus and Dirk, with the investments coming up in the infrastructure and construction industry, it is expected to come back to growth of MDI market in Western world.
When you look at our performance in the market of MDI in the last years, BASF has significantly grown in the last years with volume and capacity expansions. But it’s not only on the volume side, we have also ensured that we have significant in terms of value creation for the group as well as for our Materials segment.
When you look at the future growth fields of this MDI, we are investing and doing capacity expansion, as I was showing in the first slide, with the expansion in North America, in Geismar, MDI, we would like to double our capacity close to 600,000 tonnes expected to start up in the second half of 2026.
At the same time, we are also doing a smart debottlenecking in our Asian plants, particularly in China, both in Shanghai as well as in Chongqing. It’s not only the capacity addition, we are also coming back with new innovations in terms of sustainable products and also finding new applications, which I will touch a little later.
When you look at — in terms of our story of MDI, it all started here in Antwerp. 50 years back as in 1975, the first MDI plant was started here in this location. It’s the best to have the Capital Markets Day here today with all of you. We started the first plant with about 15,000 tonne capacity. Slowly, we expanded step-by-step, both in capacity and regional footprint, first going towards North America, then moving to Asia and then starting with Yeosu, then expanding into China. And today, we have a global capacity for MDI close to 2 million tonnes. And that’s not the end. We are coming with expansion, as I highlighted, in Geismar, and we are also planning, again, smart debottlenecking further to expand our capacity in China.
As Martin alluded, innovation and sustainability are key to the success of our value chains. Here in MDI, we focus on innovations with the specifics on sustainable solutions for our customers. Here, we have examples — a few examples I have shared.
One is B2Last. It’s a new application of our aromatic isocyanate additive in the bitumen application. This improves the quality of roads, durability of roads at the same time, allowing lower emissions. It’s not only that this is — this enables for recirculation of old asphalt back into circulation. With this, we are able to launch new application for our MDI grades in the last years. It’s not only on MDI application for — in the road paving, but also BASF has been the first to launch a net zero Lupranat MDI in the market a couple of years back. It’s not only in terms of application, but also on the net zero, we also look for circularity.
In terms of circularity for soft foam recycling, BASF has developed a process and together working with customers to launch them. If you have a chance to stay at our Renewable Hotel in Ludwigshafen, you will enjoy sleeping over our mattresses, which are made out of recycled Polyols out of these old foams.
We continuously focus on process optimization to improve our cash cost position, but at the same time, also reduce our CO2 footprint and to ensure highest level of energy integration. With these, we are positioned with many more innovations, sustainable solutions for MDI, but also other value chains within polyurethane segment.
It’s not only that we are a market leader in the global presence in the global capacities of MDI. We also believe we are one of the benchmark in terms of product carbon footprint and sustainability solutions for MDI. Here, this slide gives you an example where we have best-in-class product carbon footprint in all the regions where we operate. It’s not only in terms of having lowest PCF grade for our standard grades, we also bring low PCF products, even net zero product, as I highlighted with Lupranat Net Zero, which we launched a couple of years back. With this, we have quite a differentiation both for our internal customers as well as external customers.
Our objective is to nurture our MDI value chain further to ensure that we are growing with the capacity additions at respectable rates so that we can keep up our market leadership in terms of MDI in all regions where we operate.
Next, I would like to give you another important value chain of the PU, which is TDI. TDI, which is toluene diisocyanate, is mainly used in the flexible foams. Particularly in mattresses, in furniture, in automotive seats, in case applications, whether it is coatings, adhesives, sealants and elastomers. When you look at TDI market, it is a very difficult market in terms of — for various reasons.
One is in the last years, the growth of TDI has slowed down. So it has been a slower growth compared to the past on the TDI market. It’s globally. On top of it, there has been significant capacity additions on the TDI market, particularly and especially in China. This had put additional pressure on the TDI value chain. What we see is that is a reason — main reason in terms of the supply-demand balance. It will — because of the long market of the supply and demand balance of TDI, it will take a couple of years to absorb all the additional capacity.
With these reasons, not only on the capacity additions and supply-demand balance, but also on the energy cost high in Europe, we have taken a decision on the optimization of TDI value chain in the last years. We announced the shutdown of our TDI plant in Ludwigshafen in 2023. And this was the right decision to have made. And with that decision, we have shown we have improved significantly our global asset effectiveness, keeping our market share globally at a lower cost base. With that, we are able to make an EBITDA positive as well as cash positive in a very long market in 2024. With the same setup, we expect to deliver similar results as well in 2025.
Our objective to go forward for TDI is to keep our costs under check keep our cost competitiveness in all the assets where we operate, make sure that it is breakeven in terms of EBITDA and cash for the years until we could recover from the long market. With that, I would also hand over back to Martin to see how we are able to create value out of this quite a lot of number of molecules.
Martin Jung
Indeed. So if you come back to the world of systems, this is where, as Markus phrased it this morning, the magic starts, the chemistry comes into play. And you see this myriad of applications of polyurethane systems, which had made a success of that molecule actually.
So you can formulate a very, very rigid insulation foam that you find in construction or in a fridge in appliances, to transportation foams that you find in all kind of applications in your car, in headliners, in trim, in seatings and wherever. And then you find it in footwear and as also you find it in so-called case application, which is coatings, adhesives, sealants and elastomers. So these are semi-rigid materials. You see the entire span of applications that is possible.
We’re playing most or less in all of them, and that has obviously also implications. It has the implication that we have to mimic and understand all the processes that come with it. Like a double band line, a pilot line that we have to limit further to simulate our customers in the construction industry as well as rotating plate machine that we have in order to simulate the applications of our footwear industry.
So this is rather than intense in R&D. Therefore, we have an R&D intensity typically between 2% to 3%, and we have a vitality index of 20%, 20-plus percent. So we turn over 1/5 of our portfolio every 5 years. And if you look at it, innovation areas are obviously seen in the electromobility arena in, for instance, battery potting, I have an example here where the cylindric cells of a huge battery, these kind of things are as big or bigger as a mattress and the voids between these cells are filled with so-called battery potting. So a massive amount of polyurethane system, rigid stuff going into this one. These are very, very complicated applications because you can imagine the amount of testing that is done on this one, runaway situations and so forth. So typically, this is a kind of a multiyear project that we do with customers.
But then on the other hand, you have footwear customers where you have to formulate within a couple of weeks for the new series of an Adidas shoe, for instance. So there’s a huge spectrum. And that means in the end, this business is all about complexity management. Complexity in assets, complexity in customers, complexity in formulations, complexity in raw materials, insights and so forth. And that is what you have to manage every day in order to come to the best cost position.
So again, I mentioned before, we have a stable market position, 16%, good positions worldwide, the strongest one in Asia. And perhaps also interesting in terms of customers, this business is rather unique because you have nearly as many products as customers and only 50% of our sales is made up with 100 customers. For the rest of the 50%, you need around about 3,500 customers. So again, customer management and small customer management is key. And as these formulations are very unique to the customers, you don’t find a lot of distribution in this market, which is also pretty unique for polyurethane systems.
Now you’ve also seen about growth rates, perhaps an interesting observation here. Typically, the systems market is growing lower than the monomers market for the simple reason that huge customers start to formulate themselves. And that is exactly also the separation that we have between our divisions. I’ve been asked yesterday, how do you separate your customers? It’s very easy. It comes from the customer buying behavior. As long as customers want to have formulation, that means technical service, technical advice, it’s with us. If they want to buy molecules, they ring a phone at run. So this is very simple, and we constantly look at our portfolio and reshuffle customers back and forth dependent on their behavior.
Another very interesting and really exciting product line that we have in the polyurethanes is our so-called Cellasto business. I guess not a lot talked about here. It’s a several hundred million business for us, and it’s really a tier business to the industry. And what we do is we build so-called chance bumpers and top mount elements for suspension systems for car. You see one of them here, Monster. So this is part of a suspension system for Volkswagen MQB, so the big platform running on nearly all the midsized Volkswagen cars.
And what we manufacture are these chance bumpers that are the ultimate dampening element in a suspension system or top mounts, which you see embedded here. And we deliver this kind of stuff, even including the aluminum casting with our tollers really as a tier business to the automotive industry with a lot of success. We’re doing this since 60 years and more than 400 platforms that we are serving and have a market share of more than 50%.
Now this business as the entire automotive industry is growing obviously fastest in Asia. And therefore, we also put our headquarter for this business to Shanghai, and that is also one of the winning factors, I would say, for that business that had been now growing above market because we could enter into Chinese OEM platforms. And also we could serve new needs in electromobility where the noise level and frequency level is a totally different one.
Now let’s talk a bit perhaps about the sustainability side of it. Ram also alluded to this one. Everybody talks about plastics, microplastics, sustainability of plastics. I always put it in two parts. It’s — on the one hand side, it is the energy side of plastics that can be sometimes intense. A polyurethane system has around about 3 kg of product carbon footprint. Polyamide 66 has much more than that. So it’s an important factor. So first of all, we try to bring down the product carbon footprint of our products and systems. And the way we do it is we buy from our upstream suppliers and Ram showed that he can produce the best PCF position in the market. Lupranat ZERO is one example. So we are able to trim down the product carbon footprint for our systems if we want and if customers are willing to pay for that.
The other part is the important part of circularity. And again, this has two aspects. It is, first of all, the recyclability, the recyclability of your material. If something today is not recyclable, then many of our customers, particularly in automotive industry, would start to discard the material because design for recycling is not possible and design for recycling becomes an important prerequisite in markets, predominantly in the European markets, but also the Asian OEMs are thinking in this way. So recyclability is, I would say, a ticket to play also for polyurethanes. Therefore, we spent a lot of time in the last years to demonstrate as Ram showed for the mattresses, but also for all our materials that polyurethane systems and materials are definitely recyclable, which is not chemically not so trivial.
So I show you two examples here. One is one example that we did with our customer, Vitra, iconic furniture maker, Southern Germany. And many of you might have this fantastic in chair and design icon. And what we did is we used their post-industrial waste, so out of their manufacturing, use this waste, remelted it in the extruder process and brought it back in the system. So what you see here and what Vitra is using is recycled foam. It looks like this. It’s a little bit gray and the soft forms, which they use and they brought an entire line, you can see it on their homepage, where they also market this feature of recycled foam in their furniture. So it’s very important for them. And therefore, we are very happy to show this.
A second one, which is perhaps also not so intuitive is what we did with our customer for fridges, Liebherr. Liebherr, again, a German fridge maker, a little bit niche. They make — they are leaders in wine coolers, whoever is interested in wine coolers to the theme of last night. They are the leaders make very nice fridges, and they wanted to have recycled content in their fridges. So what we did with them is we went to scrap yards, looked at the fridges that are collected. They have to be collected actually in Europe and took out post-consumer — post-consumer waste from the scrap yard and reformulated it as a kind of glycolysis procedure and brought it back as Polyol back to the fridge here.
So we showed in principle, it’s possible. It’s a matter also of cost. It’s a matter of engagement in the value chain that is important. Nobody of us can do this alone. So it requires that you involve with people that are in waste, people that are in sorting, people are in collection and so forth and that you establish entire value chains.
If you want to learn more about this, this will be our big theme on our K fair. Next week is a big plastic fair starting on Wednesday in Düsseldorf. We will have super examples not only on the polyurethane value chain, but also a lot on plastics that we worked on in the last couple of months, and you also find some already on LinkedIn.
So far on sustainability of plastics, let’s perhaps come back to the future of growth. As we’ve been talking about smart growth and low asset growth, I think here, we see a couple of examples that we still selectively invest in things that are really, really growing. Two of them, we invest in a new Cellasto line for this kind of business currently in India as well as in China to support our customers there. Very much wanted local content from our customers. And we also opened last year a technical center in Mumbai for our Indian formulation customers because it’s important to have the know-how on ground.
Coming back to our Verbund site in South China. We opened our thermoplastic polyurethane line in ’24. And just in line what Dirk and Markus said this morning, this start-up was extremely smooth, perfect, perfect execution, and now we started it up and get into the market. But also in Monomers, you continue to invest in our growth market Asia.
Ramkumar Dhruva
Of course, I need to be in line with your growth as well as third-party market growth across all regions. So as I hinted earlier, we continue to have a smart debottlenecking of our assets in Asia, particularly in China, which is — continues to grow in the isocyanate market. We are implementing similar measures in the next years to bring up and debottleneck our capacities in Shanghai and Chongqing. And with that, we are in line to supply our internal demand as well as external customer growth.
Ladies and gentlemen, as you know, in terms of our polyurethane value chain, it’s not only a global presence. We are proud of sustainability and innovation, but also it has to be a value creation. So as Markus alluded to it, two important themes of our new strategy is winning behavior and value creation. Every — not only — every quarter, we look at our performance and benchmark ourselves with our peers in the market, how are we performing? Even though it cannot be a one-to-one comparison directly, but it gives you a benchmark where we are positioned as a PU value chain within the market segments we operate.
Here is a comparison of some of the peers who operate in the PU value chain globally. And I would say from this, we are in a good track to say not only we deliver significant value, but we also continue to improve our performance over the years. Our objective is to keep our balance of upstream as well as downstream, focus on asset effectiveness, cost competitiveness and also focus on sustainability on the downstream, close to customer locations, improve on new innovations and specialty solutions for our customers with this balance we would like to grow our business and also make it profitable and value creation for us within the company also for our investors.
It’s also not only just value creation, and I would like to reiterate the contribution of Materials segment to the growth of BASF and our commitment in 2028. As was highlighted already by our Board and by our head in the last year, we reiterate our commitment of our delivery of EBITDA margin in 2028. So we expect to increase from 2023 until to 2028, additional EUR 750 million to EUR 850 million from the Material segment so that we can grow our business profitably and also sustainably.
With this, we conclude our presentation. We are open for our discussions, any questions, and thank you for your kind attention.
October 9, 2025
ADNOC offers concessions in bid to resolve E.U. probe of $14B Covestro deal
Oct. 06, 2025 11:14 AM ETCovestro AG (CVVTF) Stock, COVTY StockBy: Carl Surran, SA News Editor
Abu Dhabi’s state oil group ADNOC said Monday it offered concessions to the European Union’s competition regulator in a bid to end a probe of the company’s €12 billion (~$14 billion) takeover offer for German plastics maker Covestro (OTCPK:CVVTF) (OTCPK:COVTY).
The package of commitments includes a pledge to maintain Covestro’s (OTCPK:CVVTF) (OTCPK:COVTY) intellectual property in Europe as well as concessions on the company’s unlimited state guarantee from the United Arab Emirates, Bloomberg reported.
A spokesperson for the European Commission said the companies filed remedies to the regulator as part of its investigation but did not disclose any specifics.
The E.C. started investigating ADNOC’s deal for Covestro (OTCPK:CVVTF) (OTCPK:COVTY) in July under a European Union law designed to tackle market distortions caused by companies with heavy subsidizing from non-E.U. governments, and the deal also is under scrutiny by German regulators under rules governing foreign direct investments.
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