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German chemicals group BASF announced its oil and gas unit, Wintershall, is in talks to merge with DEA, the oil and gas business spun off by RWE in 2014.

DEA was purchased by Russian billionaire Mikhail Fridman’s Luxembourg-based investment fund LetterOne in 2015 for €5.1bn, just before oil prices collapsed.

Analysts at the time had said that if Mr Fridman’s bid was unsuccessful, BASF would be another potential buyer. A merger could give BASF a chance to pick up the asset at a considerably lower price.

BASF said on Friday it would hold the majority of the shares in the joint enterprise if an agreement is reached, adding that an IPO “would be an option in the medium-term”.

“The outcome of the discussions is open and there is no assurance that any transaction will be consummated,” it added.

A BASF spokesman declined to comment on the valuation or timing of the deal, nor would he say how long the two groups had been in talks.

Patrick Lambert, analyst at Raymond James, said: “We do not see any major value creation at this stage, as both sets of assets are run tightly, but the value could be crystalised through an IPO at a later date.”

DEA pumps oil and gas in the UK, Germany, Norway, Denmark and Egypt.

BASF shares rose nearly 3 per cent on news of the talks, first reported by Bloomberg.

A spokesman for LetterOne declined to comment.

Wintershall produced net sales of €2.8bn in 2016, with operating earnings of €500m.

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