Incoming BASF Boss Rules Out DowDuPont-Style Break-Up

A portfolio manager at a top 20 BASF shareholder, who declined to be named as they are not authorised to comment publicly on the investment, also saw the merits of a break-up.

"Downstream, speciality chems could work separately," the manager said. "To de-clutter and reduce complexity ... tends to increase multiples and returns, but German companies are not well known for it."

BASF has said that sharing logistics, excess energy and by-products within its chemical complexes saves it more than 1 billion euros ($1.2 billion) per year.

There are also supporters of the integrated approach among BASF's shareholders.

Arne Rautenberg, of Union Investment, said there was still a lot of value in the model.

"The results this year wouldn't have been good without the basic chemicals assets," he said. Any move to separating them from the rest "would very much surprise me and I wouldn't be excited", he added.

Tale Of Two Sectors

BASF has been a tale of two sectors over the past year.

Supply bottlenecks at rivals and strong industrial demand have flung BASF's basic chemicals business into a surprise upward cycle. Meanwhile, margins of its more complex, specialty products, the group's designated growth drivers, have been squeezed by higher raw materials prices.

"If upstream strength dissipates and the downstream margin struggles continue, then we think investor focus will turn to portfolio questions," HSBC analyst Sriharsha Pappu said in a recent research note.

If allowed to strike out on their own, BASF units making construction chemicals, coatings and catalytic converters could bolster their earnings and fetch better trading multiples on the stock market, the HSBC analyst said.

Brudermueller, a BASF veteran, is currently chief technology officer and deputy CEO at the firm, which is due to report first-quarter results on Friday. He said that his focus would be on new technologies after taking over from CEO Bock, who by contrast had been the company's finance chief before taking the helm and has a background in business administration.

The CEO-designate cited cathode materials for car batteries as one area of focus, and also using BASF's new supercomputer to speed up discovery of new compounds.

"The fact that I have a background in technology and science will result in us having a change in perspective," he said, adding that he would provide an update on BASF's strategy towards the end of the year.

(Additional reporting by Simon Jessop in London; Editing by Pravin Char)


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