BASF Weighs Evonik Takeover While Lining Up Banks for Agricultural IPO

BASF made a non-binding approach to Evonik and tapped Citi, Deutsche Bank, Goldman Sachs and JPMorgan to prepare a Frankfurt IPO of Agricultural Solutions.

BASF has set two very different strategic wheels in motion, and investors are still deciding which one matters more. On one front, the Ludwigshafen-based chemical giant has approached Essen specialty chemicals maker Evonik and its anchor shareholder about a possible full takeover. On the other, it has mandated a quartet of heavyweight investment banks to prepare a Frankfurt listing of its Agricultural Solutions division.

The market's immediate verdict leaned cautious. BASF shares slipped 2.8% to EUR 50.76 on the day the Evonik soundings became public, a retreat that came alongside a milder 0.7% decline to EUR 51.86 as news of the IPO groundwork circulated.

A Non-Binding Approach, Not a Deal

Evonik and the RAG Foundation confirmed that BASF made an unsolicited, non-binding approach regarding a potential voluntary public takeover offer for all Evonik shares. Both sides were quick to pour cold water on any suggestion that a transaction is imminent: Evonik stressed that no negotiations are currently underway and that no binding purchase offer exists. BASF acknowledged the exploratory talks with the foundation and Evonik but emphasized that the course and outcome of those initiatives remain entirely open.

The RAG Foundation's roughly 43.8% stake in Evonik makes it the pivotal player in any deal. While the foundation has reportedly aimed to eventually trim its holding to 25.1%, a complete exit would require far-reaching strategic coordination.

That BASF is hunting for ways to reshape its portfolio has been evident for months. According to reports from the Financial Times and Bloomberg, the company has long been holding preliminary talks with banks to explore consolidation options in a European chemicals industry squeezed by margin pressure. A combination of the two groups would create a business with combined annual revenue of about EUR 74 billion.

Analysts Split on the Logic

Reactions on the sell side have been mixed. Citigroup analysts frame a potential merger as defensive consolidation at a cyclical trough, noting that Evonik's portfolio offers meaningful synergies with Ludwigshafen in roughly two-thirds of its businesses. JPMorgan, by contrast, has taken a dimmer view, warning that the sheer complexity of such a fusion and the financial commitments it would entail are likely what is unsettling investors right now.

Complicating any mega-deal are the restructuring programs running at both companies. BASF is itself in the midst of a deep transformation, having cut around 7,000 positions worldwide between January 2024 and the end of June 2026, while planning to float its agricultural business in 2027. Evonik has imposed its own strict austerity course, with management in Essen announcing 3,200 job cuts worldwide by the end of 2029, about 2,150 of them at German sites. Whether the takeover talk ever turns into concrete negotiations now hinges largely on the discussions with the RAG Foundation and on how a combination would be financed.

Four Banks Tapped for the Ag Listing

The agricultural spinoff is further along. BASF has enlisted Citi, Deutsche Bank, Goldman Sachs and JPMorgan as global coordinators to prepare a possible IPO of Agricultural Solutions on the Frankfurt stock exchange. The move lands at a delicate moment for investors: with the separation from the traditional coatings business now complete, attention shifts to the organizational independence of the crop-science unit. A final decision on whether to proceed, and on timing, has yet to be made.

Even so, the step underscores how determined management is to reorganize the conglomerate. Much of the division's global business has already been transferred into legally independent entities with industry-specific systems, and the remaining conversion is due to wrap up next year so the unit is listing-ready by mid-year.

Can a Partial Float Unlock the Value?

For shareholders, the fundamental question is whether the gradual disentangling can permanently narrow the chemical giant's valuation discount. Agriculture has long been a pillar of the group, yet it ties up substantial capital for lengthy approval processes and product development. The planned structure, under which BASF intends to remain majority owner even after an IPO, raises its own strategic questions: can a partial listing truly unlock full value while tight links to the parent persist? The decisive yardstick for the overhaul will be whether these steps deliver a lasting re-rating of the remaining core business.

In the optimistic scenario, management pulls off a transition to a more flexible setup with sharply defined units. A successful listing of the agricultural arm would give the market an independent, transparent way to price the business. Pure-play agricultural specialists often command higher valuation multiples than integrated chemical companies, and BASF would benefit directly as majority owner. If the group can simultaneously stabilize operating margins in cyclical base chemicals, the current annual gain of 17% could firm up. The steady carving-out of peripheral operations also buys badly needed operational freedom: standalone units can respond far more nimbly to shifting customer demands, as demonstrated by the coatings business Surventis, which became independent with new co-owners yesterday and whose separation got underway without operational disruption.

Headwinds and Production Risks Cloud the Picture

The downside risk is not to be underestimated given the global economic backdrop. JPMorgan analyst Chetan Udeshi keeps BASF rated "Underweight," arguing that the special tailwind triggered by the Middle East war is fading noticeably. The research house advises investors to underweight European chemical stocks such as BASF with particular emphasis in their portfolios. Udeshi also views the reported interest in competitors critically, arguing there are better options available to the company.

Should demand in key markets weaken further, margins in the capital-intensive flagship plants would come under rapid pressure, and unpredictable operational risks at sites worldwide add to the mix. On Wednesday, a production halt occurred at BASF Polyurethane Co. in Shanghai following a toxic gas leak during wastewater treatment. Such incidents immediately stoke market fears of supply disruptions for key plastics raw materials.

November Strategy Update Is the Next Marker

For investors, the stock sits at a sensitive turning point. As long as the internal separation proceeds to plan and core segments deliver stable cash flows, the odds favor a gradual unlocking of portfolio value. If the economic environment tips on fading special tailwinds, or if the carve-out plans stall, fresh markdowns in the chemicals sector could follow. One key date is already set: on November 24, 2026, BASF will host a Capital Markets Day, where management will present concrete details on its strategy and progress in agriculture. Only those disclosures are likely to clarify whether the planned IPO will indeed proceed as swiftly as hoped.