Brenntag M&A gambit may prompt its own breakup

Univar Solutions

20/12/2022 13:28

(The author is a Reuters Breakingviews columnist.  The opinions
expressed are their own.)
       LONDON, Dec 20 (Reuters Breakingviews) - Chemicals group
Brenntag’s  BNRGn.DE  bold dealmaking foray has attracted the
attentions of an activist. PrimeStone Capital is calling on the
9 billion euro German group to scrap a potential merger with
U.S. peer Univar Solutions  UNVR.N . A deal, the hedge fund
reckons, would result in customers cutting business with the
larger group and a lengthy antitrust battle, destroying any
cost-cutting benefits. 
    Brenntag’s other shareholders hardly seem enamoured of the
deal: its shares lost some 10% on the day it was announced. 
Chief Executive Christian Kohlpaintner can still withdraw
without too much shame, as no price has yet been agreed. The
problem is that PrimeStone’s other idea, a breakup of Brenntag,
also looks viable. 
    Brenntag meshes together the humdrum business of
transporting chemicals with one that serves customers in more
specialised sectors like pharmaceuticals and nutrition.
Companies in the latter sector tend to grow more quickly and be
richly valued. Assume Brenntag Specialties throws off 770
million euros of earnings before interest, tax and amortisation
this year, in line with its share of last year’s profit. Place
that on the same 15.5 times multiple of EBITA as peer Azelis
 AZE.BR , and it could be worth some 12 billion euros – more
than matching Brenntag’s overall enterprise value. Kohlpaintner
may prove a catalyst for dealmaking; just not the kind he
intended. (By Neil Unmack) 
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 (Editing by George Hay and Streisand Neto)
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