Brenntag in 'preliminary discussions' to acquire Univar

ESSEN, Germany—The two largest chemical distribution firms in the world may be on a path to becoming one company. 

Essen-based Brenntag S.E. on Nov. 25 confirmed it is in preliminary discussions to buy Univar Solutions Inc.

"These discussions are ongoing and there are no concrete results or agreements yet," it said.

Accordingly, Brenntag said that it was not foreseeable "whether there will be any kind of transaction."

In a separate statement, Downers Grove, Ill.-based Univar said it had received "a preliminary indication of interest" from Brenntag regarding a potential transaction.

Brenntag's shares fell nearly 11 percent on Nov. 28 after disclosing the talks. Bloomberg News first reported on the proposed deal on Nov. 25.

Joshua Spector, Americas chemicals analyst at UBS, in a research note said that Brenntag and Univar are No. 1 and No. 2 in the world in chemical distribution. But because distributors only handle around 10 percent of global chemical sales and the market is highly fragmented, a merger of Brenntag and Univar would represent only 8 percent of global chemical distribution sales. Spector was quoted in ICIS News.

Brenntag distributes a wide variety of chemicals, including some polymers and synthetic rubber materials for applications including tires, seals and gaskets, medical devices, wires and cables, and tubes and hoses.

The portfolio of rubber products supplied by Brenntag includes styrene-butadiene rubber, EPDM, isoprene rubber, solution SBR, butadiene rubber, acrylonitrile-butadiene rubber and thermoplastic and fluoro elastomers.

The company has a relatively small base in North America, although CEO Christian Kohlpain said earlier this month that the company wants to grow in North America and plans to double its annual spending on acquisitions to around 400 million to 500 million euros ($420 million to $525 million) over the next four years.

Brenntag said it saw mergers and acquisitions as "an enabler of future growth."

Through its exclusive relationship with Dow Inc., Univar offers elastomer materials including silicone elastomers and silanes. The company also offers antioxidants, plasticizers, accelerators, flame retardants and processing aids.

Univar briefly had a larger plastics portfolio in 2018, when it purchased Nexeo Solutions Inc. for $1.8 billion. But the company immediately sold Nexeo's plastics distribution business to One Rock Capital Partners L.L.C. That business has since been renamed Nexeo Plastics L.L.C. and is based in The Woodlands, Texas.

Brenntag shares were traded at €61.16 ($64.23) on Nov. 28, some 11-percent lower than close of business on Friday, Nov. 25.
Shares recovered slightly during the day to close at €61.82 ($64.92) by the end of business Nov. 28.

Brenntag said it did not intend to make any additional comments regarding the potential acquisition “unless and until it is appropriate to do so.”

European Rubber Journal and Rubber News contributed to this report.