• Some horizontal and vertical overlaps expected
• Approval likely achievable with limited divestments
• Scale strategy to combat Chinese competition

If German chemicals giant BASF proceeds with plans to acquire its smaller peer Evonik, the deal will raise a broad range of horizontal and vertical competition questions for merger control authorities around the world, three sources familiar with the sector told this news service.

“BASF is simply enormous; they have such a broad range of products, there will undoubtedly be some horizontal issues with Evonik,” the first source said. “But BASF is much more vertically integrated. I would expect some vertical issues too.”

Nonetheless, observers did not flag the merger as a potential prohibition. “If you really dig into it, I don’t think they actually overlap that much”, the second source familiar with the industry said.

The third industry source agreed, saying the deal would likely require careful, potentially time-consuming reviews, but should be possible with remedies.

“BASF will have done their homework; they know the drill. They wouldn’t have entered into this unless the potential divestments were acceptable”, the third source said.

Headquartered in Ludwigshafen, Germany, BASF is indeed a massive company, the world’s largest chemical producer. It employs over 100,000 people and had revenues in 2025 of nearly EUR 60bn. Evonik, based in Essen, is comparatively much smaller, employing around 30,000 people and with 2025 revenues of just over EUR 14bn.

While BASF’s operations run the gamut from chemicals, materials, industrial solutions, surface technologies, nutrition and care, and crop protection products, Evonik focuses on specialty chemicals.

Yet the two companies serve the same types of customers, for instance in the automotive, construction, electronics, agriculture and consumer goods industries.

Looking at the companies’ websites, overlaps emerge in products such as coatings additives, silica products, catalysts, personal care ingredients, specialty polymers, adhesive and sealant raw materials, and more.

Coatings additives are a good example to highlight, as the combination would overtake the market leader, fellow German company BYK, the third source said. “BYK could have an issue here, and the market could have an issue,” they said.

Another segment the first source flagged for review is hydrogen peroxide-to-propylene oxide (HPPO) solutions.

HPPOs use hydrogen peroxide to convert propylene into propylene oxide, a key chemical intermediate used to make polyurethanes, propylene glycol, and other industrial products. Both BASF and Evonik are considered pioneers in this field and have competing technologies.

All three sources said the markets for these chemicals is global and would likely need the approval of the US, European Commission (EC) and China, among others. Taking the EC as an example, the second source said regulators tend to define chemical markets narrowly and predicted a BASF/Evonik combination would likely be “very time consuming” and ultimately require divestments.

“I think this merger do-able, but I would expect a very granular, market-by-market, analysis,” they said. “It’s possible to work it out in first phase, but I’d expect it would take an in-depth review”.

However, they did not expect the review to be about portfolio effects. “In upstream markets like chemicals, portfolio effects are not really a thing. I mean, either you need ethylene, or whatever, or you don’t.”

Scale up to survive

All three sources agreed that the deal is probably motivated by a BASF strategy to survive in the face of global competition, particularly from China. They all drew parallels with the ongoing discussion of the role of scale in the EC’s revision of its merger guidelines.

“BASF has been struggling for ages, as have all European chemical players. They need to do something pretty drastic,” the second source said. “They will be telling the [European] Commission, ‘we need to get bigger in order to be competitive with the Chinese competitors.’”

The first source agreed, seeing BASF’s move for Evonik as motivated by a desire to diversify its portfolio in order to be better able to absorb market fluctuations.

“They seem to be saying, ‘we want to be a true conglomerate, so that we have different products that are operating at high and low margins and everything in between, and then we have more of a holistic way of dealing with these shocks,'” the first source said. “What you need these days is scale, not necessarily all in the same products, but in different pockets of products, so that you can spread the risk,” they said.

“Purely from the perspective of the issues the industry is facing these days, it’s a smart move, if it works,” the first source said.

The third source agreed with these views, also emphasizing the importance of scale for the company’s ability to continue to innovate.

“BASF is a production and product technology-driven company. This is their DNA,” the third source said. “Evonik is a good fit. It’s fully integrated already, culturally integrated, product-wise integrated, a global player.”

Plus, the third source stressed that for European companies to compete on research and development, they need scale. “If you want to see European companies innovating, if you want them to do R&D on the level that the Chinese are doing, they need economies of scale”.

“The big question is, will these arguments on scale land?” the second source said.

Perhaps the bigger question is whether they will ever be put to regulators.

BASF’s pursuit of Evonik is fraught with political risk, given the target’s 44% shareholder RAG-Stiftung is a foundation with considerable political and union representation on its board of trustees.

Evonik is headquartered in Essen, North Rhine-Westphalia (NRW), with thousands of jobs in the region. Hailing from the centre-right CDU party, NRW’s Minister President Hendrik Wüst sits ex officio on RAG’s board of trustees. A NRW CDU spokesperson told this news service yesterday (7 October) that Evonik should remain “successful and independent”.

As first reported  by this news service on 21 September, BASF has explored a possible merger with Evonik this year. Evonik has reportedly rebuffed BASF’s initial proposal of EUR 22.15 per share, which would value the business at EUR 10.3bn.

The European Commission, BASF and Evonik declined to comment on this article.