Brenntag ends discussions to acquire Univar Solutions

U.S.-based chemical distributor Univar Solutions Inc. has confirmed that its German counterpart, Brenntag SE, has ended discussions about a potential takeover.

On  November 25, 2022,  Brenntag  announced that  it was in  early-stage  discussions  regarding  a  potential  acquisition of Univar Solutions Inc. On December 20, 2022, in an open letter to Brenntag management, PrimeStone Capital LLP, which held a 2% stake in Brenntag, expressed “ strong opposition to  the acquisition  of  Univar” and offered a “a  superior  alternative to create significant value from the currently depressed valuation of Brenntag.”

Primestone Capital said “The antitrust process is likely to be  lengthy  and  difficult.  The  complex  execution  will  also  be  a  costly  distraction  from  the  core  business, which truly needs to be improved, and from other opportunities that could be seized.”

The activist investor further stated that “it is time to unleash the potential of Brenntag’s two businesses by pursuing a full separation of  these two world leaders. In particular, Brenntag Specialties needs to be released from the burden of  being  tied  to  the  Essentials  business, which  has dragged it down  for  too long already: it is  currently at a competitive disadvantage to attract customers, suppliers and M&A targets. Such a  split will provide greater focus and accountability as well as a better strategic, operational and  financial performance of each individual business. It will also offer investors the option to invest  in only one of the two businesses and should lead to a significant rerating over time. We believe  this could be done within the next 18 months.”

In addition, Primestone Capital urged that Brenntag buy back EUR2.5 billion (USD2.65 billion) of its company’s shares to capitalise on Brenntag’s depressed valuation and “restore an  efficient  balance  sheet” with ~2x net debt  to  EBITDA (earnings before interest, taxes, depreciation and amortization)  by  the  end  of  2023.

PrimeStone, which primarily invests in a limited number of European companies, was founded by three former partners from The Carlyle Group, specializing in corporate buyouts.

In November 2022, Brenntag announced its strategic growth plan, with strategic mergers and acquisitions as an enabler of its future growth, doubling the annual planned M&A spend to around EUR400 to 500 million (USD412 to 516 million).