July 27, 2016 / 11:20 AM / 2 years ago

BASF says must run Chemetall very well to avoid buyer's remorse

FRANKFURT, July 27 (Reuters) - Global chemicals maker BASF warned that the $3.2 billion it paid for Albemarle Corp’s surface-treatment unit Chemetall set a high bar for future returns from the investment.

“Chemetall didn’t come cheap so we have to run it very well to create value for our shareholders,” Chief Executive Kurt Bock said on an analyst call to discuss quarterly results.

Bock has repeatedly given warnings against large and expensive deals amid a consolidation wave in the chemicals sector.

In a move to bolster its automotive coatings business, Germany’s BASF agreed to buy Chemetall for 15.3 times its target’s most recent earnings before interest, tax, depreciation and amortisation (EBITDA). BASF itself is trading at 7 to 8 times earnings.

Industrial chemicals peers such as Evonik have recently bought businesses at comparable multiples, while ChemChina pledged to pay even more for crop chemicals maker Syngenta. (Reporting by Ludwig Burger; Editing by David Goodman)

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