The European Commission has conditionally approved, under the EU Merger Regulation, the proposed acquisition of BASF's coatings division by U.S.-based Carlyle Group Inc. The approval is tied to compliance with certain commitments offered by Carlyle, including the divestment of Nouryon’s polysulfides business to an approved buyer. The information was announced in a press release issued by the European Commission.

Carlyle is a global investment firm with a portfolio that includes Nouryon, a global specialty chemicals company. Nouryon develops and supplies essential chemical ingredients, additives, and intermediates used in a wide range of end markets, including coatings and sealants.

BASF Coatings develops, produces and sells coating products and solutions for the automotive industry, applied surface treatments for various other industries, and coatings and sealants for aerospace original equipment manufacturers.

The commission had concerns that the transaction, as initially notified, would lead to foreclosure in the markets for the production and supply of polysulfides for aerospace sealants, in which Nouryon is active, and the production and supply of aerospace sealants, in which BASF Coatings is active.

In particular, the commission's investigation found that the merged entity would likely have the ability and incentive to limit the access of BASF Coatings' competitors to polysulfides for aerospace sealants, given that polysulfides are a critical input in the production of aerospace sealants, with no available substitute for this application. Additionally, Nouryon has significant market power in the market of polysulfides for aerospace sealants, being one of only two global suppliers, and switching polysulfides suppliers is costly and time-consuming for aerospace sealant manufacturers.

The Commission's investigation also found that the merged entity may have the ability and incentive to use commercially sensitive information available to Nouryon, to put BASF's Coatings' rivals at a competitive disadvantage.

To address the commission's concerns, Carlyle offered the following remedies:

• To divest Nouryon's worldwide polysulfides business to a suitable purchaser. This includes Nouryon's Greiz Plant, which manufactures all of Nouryon's polysulfides supply, and all relevant assets, licenses, contracts and staff;
• To find a purchaser with a sound understanding of industrial supplier qualification processes. The purchaser must be a company with proven expertise in the chemical industry, or a financial investor with experience managing companies in the chemical industry.

The commission reports that these commitments fully address its competition concerns by fully removing the vertical relationship between the two companies' activities in the production and supply of polysulfides for aerospace sealants, as well as aerospace sealants themselves. The decision is conditional upon full compliance with the commitments. Under the supervision of the Commission, an independent trustee will monitor their implementation, and the commission will assess the suitability of buyers proposed by Carlyle in the context of a separate buyer approval procedure.