• Groundwork still being laid for potential deal – source
• Agricultural Solutions IPO may be current focus
• Chinese competition, EU merger rules add to near-term rationale

BASF has explored a possible merger with Evonik this year, according to three sources familiar with the matter.

Any further progress would only be undertaken at a high level across both German chemicals players, one of the sources said. Such discussions have taken place, though the situation remains hard to read, the second source added.

However, BASF is still setting out the preparatory groundwork for a potential transformational tie-up with Evonik, and the possibility of a deal remains live, the third source said.

Competitiveness pressures across German industry and the wider European chemicals space means “it makes sense for this deal to happen at some point”, the second source said.

However, such a move in the near-term should be considered a distant prospect, a fourth source familiar with BASF said. “BASF is cash constrained and will get the Agricultural Solutions IPO done before they even try with a transformational acquisition,” he argued.

Last week, BASF announced it had mandated Citi, Deutsche Bank, Goldman Sachs and JP Morgan as global coordinators for its Agricultural Solutions IPO, targeted for mid-2027 at the earliest.

BASF posted net debt of EUR 17.12bn at end-1H26, with its trailing 12-month EBITDA before special items of EUR 7.269bn, putting its leverage ratio at 2.35x. Yet 1H26 free cash flow was negative EUR 1.56bn (versus negative EUR 1.266bn in 1H25).

Its market capitalisation is around EUR 46bn and Evonik’s is EUR 8.1bn. As for using paper consideration to clinch a deal, BASF would likely want to see share price appreciation before taking that route, the fourth source said. However, the stock is up just over 15% year-to-date – while being some 25% below highs touched in early 2022.

“They’d call it a merger, but it would be a takeover [by BASF] of course,” a fifth source familiar with the company said.

Real chemistry

Any tie-up would be fraught with political headaches given the impetus to shut plants to cut costs, the fifth source said.

Sources conjure the image of a deal that has long been talked about without progressing from the drawing board, with one recalling board discussions some years ago and another saying the prospect has been on the agenda for 20 years.

But the European chemicals industry is in deep trouble across Europe given Chinese competition and the constant threat of tit-for-tat tariffs, the first source said.

“A tie-up with Evonik would be very consistent with the mood of the times,” a chemicals partner at a global law firm said.

Having opened its flagship Zhanjiang facility in March 2026, BASF has done well to establish a Chinese footprint, he added. The EUR 7.7bn enterprise value sale of its Coatings division to Carlyle (completed in June 2026) also demonstrates clear corporate restructuring execution, the lawyer said.

In this context, pursuing Evonik would allow BASF to pursue further efficiencies in Germany, while also maintaining scale, the lawyer said.

Furthermore, the European Union’s (EU) new merger guidelines may give greater room for manoeuvre than the parties had in the past, he said.

Given the EU’s apparent desire to create scaled European champions – and increase the continent’s resilience in the face of fracturing globalisation – the parties could argue that the deal is necessary against the “big bogeyman of Chinese industrial capacity”, the lawyer said.

If preparations for the deal do bear fruit, the BASF/Evonik tie up would certainly be a test of Brussels’ new merger rules, the third source said.

BASF and Evonik declined to comment. Evonik’s 44% shareholder RAG Stiftung also declined to comment.

by Georgina Barnard and John West