Ciba is in a sandwich. The Swiss speciality chemicals producer is much smaller than both its raw materials suppliers and its customers – so when materials prices are rising it has little negotiating clout, and struggles to pass on the cost increases. Putting the business together with BASF offers a solution. After all, BASF is itself both a supplier and a customer of Ciba, and is in the unusual position of producing oil and natural gas – vertical integration that has been a particular strength as crude oil prices have rocketed. At the other end, Ciba’s products can benefit from being put through BASF’s superior sales and distribution network.

The strategic fit looks attractive in other ways. The deal forms a global leader in plastics additives and in “coating effects” or pigments. The question is about the price BASF is paying for all this. At a 32 per cent premium to Friday’s close and 60 per cent premium to the average price for the previous 60 days it looks, as BASF admits, steep. But the multiple of 8.6 times consensus estimates of 2008 earnings before interest, tax, depreciation and amortisation is broadly in line with other recent chemicals sector deals – and well below the 11 times-plus Dow Chemical in July paid for Rohm & Haas.