The European Commission has approved Carlyle’s proposed acquisition of BASF’s coatings business, but only after the US private equity firm agreed to divest a key chemicals operation to address competition concerns in the aerospace sector.
The regulator said the transaction, which brings together Carlyle-owned specialty chemicals producer Nouryon and BASF Coatings, would have risked reducing competition in the supply chain for aerospace sealants.
The approval is therefore conditional on Carlyle selling Nouryon’s global polysulfides business, including its manufacturing facility in Greiz, Germany, and related assets, contracts, licences and personnel.
The Commission’s investigation found that the deal, as originally structured, could have enabled the merged company to restrict rivals’ access to polysulfides — a critical ingredient used in aerospace sealants for which no substitute currently exists.
Nouryon is one of only two global suppliers of polysulfides for aerospace sealants, giving it significant market power. Regulators also noted that switching suppliers is costly and time-consuming for aerospace sealant manufacturers, raising concerns that competitors could face supply disadvantages after the merger.
In addition, the Commission warned that the combined business could have gained access to commercially sensitive information through Nouryon’s supplier relationships, potentially placing BASF Coatings’ competitors at a competitive disadvantage.
To secure clearance, Carlyle committed to divesting Nouryon’s worldwide polysulfides business to a buyer with proven expertise in the chemical industry or relevant experience managing chemical companies. The purchaser must also demonstrate a strong understanding of industrial supplier qualification processes.
The Commission said the remedies fully eliminate the competition concerns by removing the vertical link between Nouryon’s polysulfides operations and BASF Coatings’ aerospace sealants business.
Following positive feedback from a market test of the proposed commitments, the Commission concluded that the transaction, as modified, would no longer raise competition issues within the European Economic Area.
An independent trustee will oversee implementation of the commitments, while the Commission will retain the right to approve the eventual buyer.
Carlyle, headquartered in the United States, is a global investment firm whose portfolio includes Nouryon, a specialty chemicals company serving markets such as coatings and sealants. BASF Coatings, part of Germany-based BASF, develops and supplies coatings and surface treatment products for the automotive, aerospace and industrial sectors.
