Dusseldorf, Germany-based Cognis signed a sale and purchase agreement to sell 100 percent of the shares in Cognis Holding GmbH to BASF SE for 700 million in cash. Including debt and pension obligations, the transaction is valued at 3.1 billion. Since November 2001, Cognis Group has been owned by a consortium of private equity funds advised by Permira, Goldman Sachs and SV Life Sciences. BASF has 105,000 employees and close to 385 production sites, while Cognis has about 5,600 employees across 62 locations in 30 countries.

Following required approvals, Cognis will be integrated into BASFs Performance Products segment, which includes the performance chemicals, paper chemicals, care chemicals, and dispersions and pigments divisions. Ludwigshafen, Germany-headquartered BASFs performance chemicals division includes brake fluids, engine coolants, fuel and lubricant additives as well as process and refinery chemicals.

We have just reached the agreement to buy Cognis and need the necessary anti-trust approvals before we have further details about the business and how we will integrate it into BASF, BASF spokeswoman Jennifer Moore-Braun told Lube Report.

Cognis synthetic lubricants includes products for transportation, wind turbine hydraulic fluids and applications that require non-toxic biodegradable. Transportation products include transmission fluids, gear lubricants, engine lubricants, hydraulic fluids, greases and military spec lubes.

The synlube offerings of Cognis overlap with the BASF product line, lubricant industry consultant Lewis Gaines pointed out. BASF also has a broad range of synthetic lubricants, principally polyalkylene glycols, Gaines told Lube Report. The applications for those are very similar in many respects to Cognis ester lubricants, since theyre both principally used in non-engine applications, such as truck differentials and wind turbine gear sets.

BASF has strong reasons to be interested in Cognis, according to Gaines. BASF is getting to be a big company these days, with a lot of lubricant and lubricant additive type products in their lines, he observed. They bought Ciba, which had a whole line of specialty lubricant additives, particularly antioxidants. So theyre building their formulary, and building their finished lubes as well.

The owners of Cognis Group spurned an offer valued at as much as 3.3 billion from Lubrizol, Bloomberg and the Wall Street Journal reported June 21, citing anonymous sources. Lubrizol does not comment on market rumors or speculation, a Lubrizol spokesman informed Lube Report when asked to confirm the reports.

The size of Lubrizols reported acquisition attempt was surprising, consultant Gaines remarked. Cognis, with $3.2 billion in revenue, is about two-thirds the size of Lubrizol and has an enterprise value of around $4 billion, he said. Lubrizol’s interest in a multi-billion dollar company was a surprise given earlier statements that they were looking for complementary acquisitions in the several hundred million dollar range.

The structure of the additives market makes large general additive acquisitions problematic, he asserted. However, Lubrizol now derives nearly 30 percent of its revenue from non-lubricant products, Gaines explained. Global additive volume growth is limited, so the incentive to utilize excess cash to grow the Advanced Material Segment is clear.

In that regard, Cognis would have been a good fit, according to Gaines, because Cognis derives most of its revenue from personal care components, health and nutrition additives, and coating chemicals. These markets would have complemented or extended Lubrizol’s existing Advanced Material Segment, he noted, adding that BASF has a lot of the same synergies with Cognis that Lubrizol would have had.

By purchasing Cognis, we will in particular expand our portfolio with products based on renewable raw materials, said John Feldmann, a BASF executive directors board member responsible for the Performance Products segment. A broader and more attractive offering of products and services combined with our research and development expertise will allow us to become an even more important partner for joint development projects with our customers.

Cognis has performed very well over the last few years, and is well positioned in attractive growth markets, said Antonio Trius, Cognis CEO.

Cognis Functional Products business unit posted sales of 229 million (U.S $283.4 million) in 2010s first quarter, up 14.1 percent from 201 million in the year-earlier period. The unit includes synthetic lubricants, mining technology, AgroSolutions and polymers, coatings and inks businesses. The coatings and lubricants businesses drove those improved sales, Cognis said, recording higher demand in all regions. Key markets such as the automotive, housing and mechanical engineering sectors had rebounded well since 2009, the company had noted.

As a whole, Cognis reported first quarter sales of 728 million, up 10.6 percent from 659 million in the year-earlier quarter. The company attributed the improvement to strong recovery in actual demand, supported by customer restocking. Cognis recorded net profit of 47 million ($58.2 million), up from a 33 million loss in 2009s first quarter.

BASF posted sales of more than 50 billion in 2009.