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Report: PE firms could abandon auction of BASF's construction-chemicals unit

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Report: PE firms could abandon auction of BASF's construction-chemicals unit

Several private equity firms that initially submitted bids for the construction-chemicals unit of BASF SE are considering backing off as they face strong competition from industrial bidders, Bloomberg News reported, citing people familiar with the matter.

Advent International's interest in the business is waning as it nears the Sept. 9 deadline for the next bidding round, while Bain Capital and Blackstone Group Inc. have already left the competition, sources said. Lone Star Funds and Cinven Ltd. are still participating in the auction, while KKR & Co. is looking to join the next round, they added.

BASF has been hesitant to provide the unit's earnings for 2019, adding to the firms' frustration as the private investors need the information to secure funding, the people said.

Meanwhile, industrial bidders such as cement giant LafargeHolcim Ltd. and Standard Industries Inc., which are still in the sale process, have an easier time valuing the unit due to their existing industry knowledge.

Building materials company Standard Industries, which earlier teamed up with Blackstone, is now pursuing its own bid for the segment. However, it is not definite if it will proceed with the offer as final decisions are yet to be made, the people said.

Some of the suitors were worried that a full carveout of the business will not be settled until the summer of 2020 due to the complicated separation of its technology systems from the rest of BASF, among other reasons, according to the people.

The business offers mortars, cement additives and waterproofing materials and sealants under its Master Builders brand. BASF shares jumped 1.77% to €57.00 on Aug. 16, according to S&P Global Market Intelligence data.

Representatives for Advent, Bain, BASF, Blackstone, Cinven, KKR, Lone Star and Standard Industries did not comment on the matter.

LafargeHolcim did not comment on any potential interest in the unit but said in an emailed statement that it is the management's duty to seek potential acquisitions and that strict financial discipline is applied with all possible targets, Bloomberg reported.