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BASF sells ingredients business; expert expects more similar transactionsBASF sells ingredients business; expert expects more similar transactions
German chemicals manufacturer BASF has sold part of its human nutrition portfolio to Louis Dreyfus. The transaction, which includes a manufacturing facility, is part of a BASF strategic realignment.
January 7, 2025
4 Min Read
At a Glance
- BASF bolstered its human nutrition portfolio with Cognis acquisition in 2010.
- Since then, its focus has shifted and some product lines no longer fit strategic vision.
- Some of the businesses acquired in Cognis deal have been unloaded to Louis Dreyfus.
German chemicals manufacturer BASF has sold its food and supplements ingredients business to French firm Louis Dreyfus Co. for an undisclosed amount. An industry expert said similar transactions can be expected in the future as companies seek to reposition themselves for an evolving market.
The transaction includes a production site in Illertissen, Germany and the transfer of 300 employees to Louis Dreyfus.
BASF was founded in 1865 to manufacture aniline dyes and expanded into other chemical processes over the years, including fertilizer and pesticides manufacturing. The firm became part of the IG Farben conglomerate before World War II. It was reconstituted as an independent firm in 1952 after IG Farben was broken up by the Allies over its close alignment with the Nazi regime and use of slave labor in its factories during the war.
The processing of human nutrition ingredients and the manufacture of chemicals for other uses have some common elements, so it has long been attractive for large chemical firms (BASF is currently the world’s largest) to seek opportunities in food and supplement ingredients, where margins can be greater.
BASF expanded into human nutrition with Cognis acquisition
BASF moved into human nutrition in a big way in 2010 with the acquisition of German ingredient manufacturer Cognis in a transaction valued at the time at about $3.2 billion. The acquisition brought with it a stronger position in personal care and human nutrition and added to BASF’s already strong position in home care and pharmaceutical excipients.
BASF’s chairman at the time, Jürgen Hambrecht, lauded the pairing, saying “Cognis' and BASF's know-how and range of products complement each other very well.”
Expected synergies didn’t pan out
However, in the intervening years, the company has shifted focus. Some of the product lines acquired from Cognis and added in other transactions no longer fit the company’s overall direction.
“The divestment of this business to LDC supports our strategic portfolio optimization and will allow us to focus on our core businesses in Nutrition & Health. We remain committed to leveraging our core product platforms and expanding our business in key areas such as vitamins, carotenoids and feed enzymes,” said Michael Heinz, who leads BASF’s Nutrition & Health division.
Louis Dreyfus Co. (LDC) will take over the manufacture of products such as aeration and whipping agents, food emulsifiers and fat powder grades; health ingredients such as plant sterols esters, omega-3 oils for human nutrition and some smaller product lines.
As part of the transaction, the prominent Tonalin CLA (conjugated linolenic acid) branded ingredient will be transferred to LDC. Cognis had introduced Tonalin to the market prior to the BASF acquisition.
“In line with our strategic plans for revenue diversification through more value-added products and growth in downstream markets, this agreement is an opportunity to accelerate LDC’s participation in the rapidly growing plant-based ingredients market,” LDC CEO Michael Gelchie said.
BASF returning to its roots
When Markus Kamieth took over as BASF’s chairman in April 2024, he announced a new strategy that aimed for “more speed in value creation,” and a “simplified internal organization.”
In September, the company opened the door to shed non-core assets, as reported by The Wall Street Journal.
This is apparently in response to a slowing of earnings growth. In its most recent financial statement for the third quarter of 2024, BASF reported $15.7 billion in sales, essentially flat from the same period a year before. In the earnings release, Kamieth was quoted as saying the company’s core assets had performed the best.
Consultant: Expect more similar transactions
Consultant Mike Bush, who heads the firm GrowthWays Partners, said the transaction is unlikely to be the last of its kind.
“This deal seems appropriate to me as LDC digs deeper into one of its core businesses while BASF jettisons a business that isn’t entirely aligned with its core,” Bush said in an email to SupplySide Supplement Journal. “I anticipate seeing similar transactions occurring as businesses look at their diverse companies and determine who they are and what they do best. For BASF, they ‘create chemistry for a sustainable future,’ not necessarily what consumers want to think of when buying their food.”
He added, “I don’t think this is the last transaction of this type. It will open up opportunities for food, beverage, and ingredient companies to consolidate technologies to support consumers and will provide an opportunity for companies like BASF and LDC to focus on their cores.”
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