- Mergers & Acquisitions
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).