It could have become the new number three in the chemical distributor market. But the shareholders were not completely convinced. The DAX group Brenntag is now ending talks with its US competitor Univar.
The world’s largest chemicals dealer Brenntag is blowing off the planned multi-billion dollar acquisition in the USA. In a brief statement, it was said that the decision had been made to end negotiations with US competitor Univar Solutions about its takeover. Brenntag did not give a reason for the change of heart. The purchase of the number three in the global chemical distribution market would have been by far the largest takeover for Brenntag at possibly more than six billion euros. The merger would have created an industry giant with sales of a good 30 billion and an operating result of almost three billion euros.
Univar now wants to look around for other possible buyers. The Brenntag shareholders, who had been skeptical about the plan from the start, breathed a sigh of relief. The papers listed in the leading index DAX increased by more than six percent at times. They made up about half of the losses since Brenntag and Univar confirmed talks at the end of November. Univar stocks fell 10 percent in premarket trading in New York.
Both companies had come under pressure from their respective shareholders in view of the negotiations. Shortly before Christmas, the activist Brenntag shareholder PrimeStone asked Christian Kohlpaintner’s board of directors to end the takeover talks. The risks are very high and far outweigh the benefits. Instead, Brenntag should buy back shares and prepare for a split, PrimeStone said in an open letter to the board.
On the one hand, Brenntag operates the bulk business with standard chemicals and, on the other hand, sells specialty chemicals in small quantities. In sales, there are hardly any synergies between the two areas. Kohlpaintner himself fueled the imagination about larger acquisitions. Recently, Brenntag had only bought smaller companies. However, at the beginning of November the CEO had increased the budget for such takeovers to up to 500 million euros a year and expressly referred to the attractiveness of the North American market. According to analyst calculations, Brenntag and Univar together would have had a market share of around 23 percent there, 9.5 percent in Europe and 8 percent worldwide.
At Univar, too, an investor opposed the talks with Brenntag. In an open letter, the US hedge fund Engine Capital asked the board to set up a formal sales process in which other bidders would also be considered. Univar is now apparently getting involved. Discussions will continue with other interested parties who have come forward, the statement said. According to Engine Capital, Univar could be valued at $38 to $44 per share in an auction process. On Friday, the last trading day of 2022, Univar shares closed at $31.80.
