BASF SE (BAS): Bernstein sees BASF–Evonik merger economics as attractive, but warns that the combined equity story could be less compelling.

Overview

Bernstein evaluates BASF’s proposed acquisition of Evonik. Its merger model indicates substantial earnings and return accretion, but the report argues that the strategic and valuation trade-offs make the equity narrative more complicated than the financial arithmetic alone suggests.

Core views

Bernstein says BASF has made a takeover proposal for Evonik, which is not covered by the firm. Its base-case merger model finds the transaction financially attractive: adjusted EPS for BASF excluding Agricultural Solutions would rise by approximately 25% or more in years 1–3 after completion, while ROIC and ROCE would improve. The accretion reflects Evonik’s higher operating margins relative to BASF’s depreciation-heavy Verbund operations, an assumed acquisition valuation of about 7.5x EBITDA, and cost synergies. Leverage is projected to be close to 2x at completion after the Agricultural Solutions IPO. The model assumes a 50% premium to Evonik’s undisturbed €18.07 share price on 24 September 2027, implying a €27.11 offer price. This equates to 7.1x 2026 consensus EBITDA and 7.7x 2027 consensus EBITDA. Completion is assumed on 31 December 2027, making 2028, 2029 and 2030 the first three post-deal years. BASF is assumed to pay 1% of enterprise value in transaction fees, issue shares without a discount to Evonik’s 43.8% shareholder RAG Stiftung, offer cash to other holders, and fund new debt at a 7% interest rate. Cost synergies are set at 5% of Evonik’s 2027E sales, or €728 million when fully ramped, phased over three years. Bernstein characterizes this as conservative relative to transaction precedents, reflecting German labour-union influence and the view that the deal can be meaningfully accretive without more aggressive assumptions. No revenue synergies are included through 2030, although the report sees possible opportunities in Evonik’s consumer-facing portfolio; it judges their likely value this decade to be limited. RAG Stiftung’s continuing obligations linked to former German hard-coal mining lead Bernstein to assume a €1.59 dividend per share for the merged company. The report’s central reservation is that positive merger arithmetic does not automatically translate into a stronger equity case. BASF would become more exposed to Europe and have a more complicated portfolio. Bernstein’s investor feedback on the transaction has been mostly negative, and it believes a combined BASF–Evonik could trade at a lower multiple than BASF’s current valuation framework. Its BASF target-price calculation applies 7x EBITDA to the Verbund, so synergy delivery must offset any multiple pressure. At the same time, nearly 30% of combined assets would be in Germany, creating a material opportunity for synergies if labour unions cooperate. Bernstein also argues that BASF could benefit from European chemicals consolidation and integration without assuming the acquisition’s financial and execution risks. For standalone BASF, Bernstein makes modest forecast changes to depreciation and 2028 Verbund profitability. It leaves 2026 and 2027 EBITDA estimates unchanged but reduces 2028E Verbund EBITDA by 1%. The valuation methodology remains a 2028E sum-of-the-parts discounted back two years, and the price target is reduced from €63 to €61. The report retains Outperform because it believes BASF can extract substantial value from existing assets and because there is no certainty that the Evonik transaction proceeds.

Analysis framework

Bernstein builds a pro forma BASF ex-Agricultural Solutions/Evonik merger model using its own BASF forecasts and Bloomberg consensus for Evonik. It tests the transaction against assumptions for price, financing, share issuance, cost-synergy ramp-up, dividends and debt, then compares the resulting earnings and return metrics with standalone BASF. It also assesses whether synergy delivery can compensate for a potentially lower valuation multiple and uses a discounted 2028E sum-of-the-parts framework for BASF’s standalone target price.

Methodology notes

• Valuation methodsSOTP (Sum-of-the-Parts) Valuation

  2028E sum-of-the-parts valuation discounted back two years

  Bernstein values BASF’s businesses separately using EBITDA multiples, bridges to equity value using the 2028 balance sheet, and discounts the result at a 9.0% WACC to derive the 12-month €61 target price.

• Other

  Pro forma merger accretion and sensitivity analysis

  The report models the combined company’s EPS, ROIC, ROCE, leverage and cash flows under assumptions for the Evonik premium, financing and synergies, including sensitivities between premium paid and cost-synergy delivery.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• BASF SE (BAS.GR)

  Primary covered company; proposed acquirer of Evonik.

  Strengths

  Bernstein sees standalone asset value and potential merger EPS, ROIC and ROCE accretion.

  Weaknesses

  A deal could increase European exposure and create a more complicated portfolio and equity story.

  Comparison

  The report contrasts BASF’s depreciation-heavy Verbund margins with Evonik’s higher operating margins.

  Risks

  European energy-cost exposure, China Verbund-site ramp-up and geopolitical risks, strategic backtracking, and merger execution risk.

• Evonik

  Proposed acquisition target in Bernstein’s merger model.

  Strengths

  Higher operating margins and cost-synergy potential support transaction accretion.

  Weaknesses

  No revenue synergies are assumed through 2030, and the transaction requires a premium and complex financing structure.

  Comparison

  Assumed acquisition valuation is 7.1x 2026 consensus EBITDA and 7.7x 2027 consensus EBITDA.

  Risks

  Synergy realization may be constrained by German labour-union dynamics and the deal may not proceed.

Key data

• BASF ratingOutperformRetained despite reservations about the Evonik transaction.
• Price target€61.00Reduced from €63.00 after a 1% reduction in 2028E Verbund EBITDA; based on a discounted 2028E sum-of-the-parts.
• BASF closing price€50.73As of 25 September 2026.
• Implied upside20%Versus the stated closing price.
• Evonik offer price assumption€27.11A 50% premium to the €18.07 undisturbed share price.
• Cost-synergy assumption€728 millionEquivalent to 5% of Evonik 2027E sales when fully ramped over three years.
• Post-deal EPS accretion~25%+Adjusted EPS accretion versus BASF ex-Agricultural Solutions in years 1–3 after completion.
• New-debt interest rate assumption7%Applied in the merger model.

Impact & implications

Bernstein concludes that a BASF–Evonik combination could improve earnings and return metrics, but its equity benefits depend on synergies being sufficient to counter a potentially lower valuation multiple, greater European exposure, portfolio complexity and execution risk. The firm sees standalone BASF as capable of substantial value creation without taking those acquisition risks.

Risks

• A renewed relative increase in European energy costs could pressure BASF’s upstream European profitability, with a price-target impact of more than €5.
• Problems ramping BASF’s new €10 billion China Verbund site or heightened West–China geopolitical tensions could weigh on investor sentiment, with a price-target impact of more than €5.
• Any reversal of BASF’s strategy of portfolio reshaping could be viewed very negatively by investors, with a price-target impact of less than €10.
• For a BASF–Evonik transaction, synergy delivery may be offset by a lower valuation multiple, greater Europe exposure, portfolio complexity and merger-execution risk.