TOKYO—BASF S.E. is divesting its global pigments business, BASF Color and Effects, as it continues to concentrate on high-growth, innovation-driven segments.
The German chemical giant said Aug. 29 that it would sell the unit for $1.27 billion to Japanese fine chemical company DIC on a cash and debt-free basis.
The transaction is expected to close in the fourth quarter of 2020, meeting the timeline previously set by BASF to divest the unit.
"We have achieved our goal to find an owner who considers pigments a core strategic business," said Markus Kamieth, a member of the board of executive directors of BASF and responsible for the Industrial Solutions segment.
BASF initiated the divestment in February, stating that the segment was not driven by innovation and that the sales growth potential was low for the unit.
"The pigments market is growing rather slowly and there is a lot of competition from Asian producers," BASF chairman Martin Brudermueller said when presented the company's annual results in February.
The BASF move came shortly after Swiss rival Clariant announced plans to sell off its pigments and standard masterbatches in September. Clariant, too, expects to complete the divestment by the end of 2020.
With around 2,600 employees in manufacturing facilities across Europe, the U.S. and Asia, the BASF's pigments unit registered sales of about $1.1 billion in 2018, down 2 percent compared to the year before.
Tokyo-headquartered DIC is active in three segments of packaging and graphics, functional products and color and display. The BASF unit will be part of the color and display segment which includes a portfolio of pigments.
The acquisition is part of DIC's growth strategy to increase sales from $7.5 billion in 2018 to $9.4 billion by 2025.
"BASF's pigments portfolio is an important strategic addition in meeting our goals more expeditiously," Kaoru Ino, president and chief executive officer of DIC, said. "It will allow us to expand our position as one of the leading pigment suppliers globally and offer our customers even more versatile solutions."