DOWNERS GROVE, Ill.—In a blockbuster materials distribution deal, Univar Inc. is acquiring Nexeo Solutions Inc. for $2 billion.
But before the ink was dry on the Sept. 17 deal, Univar officials said they're reviewing Nexeo's plastic resin business for a possible sale.
Nexeo of The Woodlands, Texas, is one of North America's largest resin distributors, and is a major distributor of specialty chemicals as well. Downers Grove-based Univar is a global distributor of chemicals and ingredients and a provider of value-added services.
The deal includes the assumption of Nexeo's debt and other obligations and values Nexeo at $11.65 per share. Nexeo's per-share stock price closed at $10.01 on Sept. 17, just before the deal was announced.
"This transformational combination is designed to create the premier global chemical and ingredients distributor, with exciting opportunities for our customers, suppliers, employees and investors," Univar President and CEO David Jukes said in a news release.
"Together, we will drive growth and shareholder value with the largest North American sales force in chemical and ingredients distribution, the broadest product offering, and most efficient supply chain network in the industry," he added.
Officials expect the deal to generate run rate cost savings of $100 million in its first full year and to reduce annual capital expenditures by $15 million.
Nexeo CEO David Bradley added that his company "shares Univar's confidence in the future of our combined enterprise, given the strong strategic alignment across our business models, go-to-market strategies, superior product offerings, and digital capabilities."
"We are especially pleased that Nexeo's employees are highly valued by Univar, and that our shareholders will be able to participate in the company's future success through ongoing equity ownership," Bradley said.
But Nexeo's resin business might not be part of Univar for long.
"Consistent with its focus on chemicals and ingredients distribution, Univar has hired an external adviser to evaluate strategic alternatives for Nexeo's industry-leading plastics business, which may include a potential divestiture," officials said in the release.
Plastics generates about half of Nexeo's sales, but would represent less than 10 percent of the combined companies' profit, officials said. The plastics unit will continue to be led by Executive Vice President Shawn Williams. The review is expected to be completed concurrent with the close of the transaction.
The merger agreement provides for each share of Nexeo stock issued and outstanding to be converted into 0.305 shares of Univar common stock and $3.29 in cash, subject to adjustment at closing.
The transaction has been unanimously approved by the boards of directors of both companies, and is anticipated to close in the first half of 2019, subject to the approval of both Univar and Nexeo shareholders. The deal also requires receipt of regulatory approvals and satisfaction of other customary conditions.
Nexeo's key stockholders—TPG and First Pacific—have agreed to provide consent for the proposed transaction. Univar intends to finance the cash portion of the transaction and refinance Nexeo's existing debt with a combination of available cash and bank financing, for which it has received commitments.
Univar posted sales of almost $8.3 billion in 2017. Nexeo had sales of almost $3.6 billion in its 2017 fiscal year, which ended Sept. 30 of that year. Nexeo distributes resins, compounds and concentrates for more than 20 suppliers.