Inside Carlyle’s €7.7bn takeover of BASF coatings: valuation, risks, and upside

BASF SE has agreed to sell a majority stake in its coatings business to Carlyle Group in a €7.7 billion deal that will see the unit spun off into a standalone platform backed by private equity. The carve-out, announced on October 10, 2025, includes a 40% equity stake retained by BASF and minority co-investment from Qatar Investment Authority. The transaction covers BASF’s global automotive OEM, refinish coatings, and surface treatment segments, and is expected to close in the second quarter of 2026 pending regulatory approvals.

BASF will retain a 40% minority stake in the new standalone coatings entity, while Carlyle and QIA will assume majority control and full operational leadership. BASF is set to receive approximately €5.8 billion in pre-tax cash proceeds at closing. The deal follows an earlier divestiture of BASF’s decorative paints segment and now values the entire coatings division at around €8.7 billion—implying an EV/EBITDA multiple of nearly 13x based on 2024 earnings before special items.

What specific segments and geographies are included in the coatings carve-out announced by BASF?

The transaction includes BASF’s automotive original equipment manufacturer (OEM) coatings, automotive refinish coatings, and applied surface treatment businesses. These operations develop and manufacture coatings for a wide array of industrial applications across metal, plastic, and glass substrates. The businesses are embedded in the global automotive supply chain and serve customers across Europe, North America, South America, and Asia Pacific.

In 2024, the coatings division generated approximately €3.8 billion in global sales. Carlyle intends to invest in the unit’s commercial infrastructure, innovation pipeline, and organizational structure, working closely with management to drive the next phase of growth. For BASF, the retention of a 40% equity stake signals ongoing strategic interest in the coatings space and helps maintain alignment between the seller and the new controlling investors.

How does the €7.7 billion valuation compare with recent industry multiples and prior BASF divestitures?

The headline enterprise value of €7.7 billion translates to an implied EV/EBITDA multiple of roughly 13x for the coatings business, based on 2024 earnings before special items. This multiple is above average for conventional industrial asset sales but is justified by the platform nature of the coatings unit, its global footprint, and the potential for private equity-style optimization under Carlyle’s control.

Combined with the earlier divestiture of the decorative paints business, the full coatings division is now valued at €8.7 billion. That combined valuation reflects the underlying profitability of the business and signals Carlyle’s confidence in margin expansion through operational excellence and structural realignment.

The coatings segment, while cyclical, is a strategic asset given its high degree of customer stickiness, regulatory barriers, and technical depth. Carlyle’s previous successes in chemical and coatings carve-outs, including its investments in Axalta, Atotech, and Nouryon, support its rationale for paying a premium multiple.

How are investors and analysts reacting to BASF’s partial divestment and capital inflow?

Initial reactions from institutional investors suggest that the transaction is broadly viewed as a prudent reallocation of capital within BASF’s broader “Winning Ways” strategic framework. The €5.8 billion cash inflow strengthens BASF’s balance sheet and may accelerate its previously signaled €4 billion share buyback program, initially slated for 2027–2028. Analysts note that the deal could enable earlier capital returns or be redirected into higher-margin, integrated chemical segments within BASF’s core portfolio.

While BASF shares traded slightly lower following the announcement, institutional sentiment appears balanced. The 13x EV/EBITDA multiple has been viewed by some analysts as aggressive given the sector’s exposure to macroeconomic cycles and automotive demand volatility. However, Carlyle’s execution history and the presence of a stable, long-term co-investor in QIA have lent credibility to the growth story underpinning the valuation.

BASF’s retention of a minority stake is also being interpreted as a risk-mitigating strategy that allows the company to benefit from potential future upside while outsourcing operational transformation and efficiency improvements to Carlyle.

What is Carlyle’s strategic interest in BASF’s coatings business and how does it align with prior investments?

Carlyle’s acquisition of a majority stake in BASF’s coatings business is in line with its broader strategy of pursuing complex corporate carve-outs in the industrial sector. The investment firm will bring its operational expertise, global footprint, and capital markets access to the table in an effort to reposition the coatings unit as an independent leader in automotive and industrial coatings.

The coatings business’s strong relationships with automotive OEMs, diversified global presence, and high technical barriers to entry make it an attractive target for private equity transformation. Carlyle plans to deepen the innovation pipeline, refine go-to-market strategies, and potentially pursue bolt-on acquisitions in adjacent segments such as powder coatings, specialty chemicals, or industrial adhesives.

By partnering with the Qatar Investment Authority, Carlyle has also ensured a stable source of long-horizon capital that reduces the need for short-term exit pressures, giving the business sufficient runway to execute transformation initiatives and scale globally.

How will BASF and Carlyle manage operational, financial, and integration risks as the coatings carve‑out moves toward closing in 2026?

As with any large-scale carve-out, the BASF–Carlyle coatings transaction carries multiple operational risks. These include the complexity of separating shared services, IT systems, and supply chain contracts. Maintaining customer service continuity, especially with automotive clients who prize consistency and technical support, will be crucial during the transition.

The coatings sector is also sensitive to raw material costs, energy prices, and global auto production cycles. BASF’s coatings division has historically been exposed to fluctuations in pigment, resin, and solvent pricing. Currency volatility and regulatory fragmentation across jurisdictions may further complicate integration planning.

On the flip side, Carlyle has clear execution levers. These include cost rationalization, commercial refocus, manufacturing optimization, and international expansion. If the firm succeeds in extracting margin gains and generating free cash flow to service acquisition debt, this deal could serve as a case study in the value-creation potential of industrial carve-outs.

What does this deal mean for BASF’s broader transformation and capital allocation strategy?

BASF has been pursuing a multi-year strategy to simplify its business model, increase return on capital employed, and focus on integrated value chains. By divesting the coatings business and other standalone operations, the German chemical major aims to streamline operations and redeploy capital toward areas such as specialty chemicals, battery materials, and sustainable technologies.

The €5.8 billion liquidity injection provides management with significant flexibility. While some of it may go toward debt reduction or shareholder returns, BASF may also use the funds to expand in high-margin, synergistic verticals where it can leverage its existing research and production infrastructure.

Crucially, the 40% retained stake in the coatings business allows BASF to remain a strategic participant in the sector, preserving upside optionality while transferring day-to-day responsibility to a specialized private equity partner.

What is the longer-term outlook for the new coatings platform under Carlyle’s control?

If successful, Carlyle could transform the carved-out coatings business into a standalone global coatings leader. Future IPO or secondary exit opportunities could emerge over a three-to-five-year horizon, particularly if EBITDA margins expand meaningfully and topline growth is reaccelerated via M&A.

Stakeholders should closely watch the integration roadmap, margin improvement metrics, debt servicing coverage, and customer retention over the next 18–24 months. Carlyle may also look to consolidate smaller coatings or specialty chemical firms to build scale and enhance product offerings.

From a financial standpoint, the debt package reportedly being arranged to finance the deal—over €4 billion in leveraged loans and high-yield bonds—will place pressure on early performance. The success of this deal could have wider implications for private equity appetite in the industrials sector amid a higher interest rate environment.

For BASF, this is a decisive step in turning portfolio theory into capital efficiency. If the carve-out succeeds, it validates a hybrid model of capital recycling without full divestment, which other large industrial players may seek to emulate.