Chemical distributors Brenntag and Univar eye merger

In a deal that could touch off a wave of consolidation, the world’s largest chemical distributor, Germany’s Brenntag, says it has begun talks to acquire one of its main rivals, Illinois-based Univar.

In statements, both firms characterize the discussions as preliminary. Brenntag notes that the talks have not yielded “concrete results or agreements.” It adds, “It is currently not foreseeable whether there will be any kind of transaction.”

Both companies are in the business of buying in bulk from large chemical companies and repackaging for smaller customers. They also blend chemicals and handle logistics for customers.

Brenntag offers more than 10,000 different chemicals and ingredients and had sales in 2021 of $14.9 billion. It is active in both North America and Europe, with each region accounting for about 40% of its sales. A little more than half its business is distributing process chemicals to industrial customers. The balance is selling specialty chemicals to sectors such as nutrition, pharmaceuticals, personal care, and water treatment.

Univar, once known as Van Waters & Rogers, is engaged in similar lines of business. It boasts a roll of about 17,000 products and had sales in 2021 of $9.5 billion, making it the third-largest chemical distributor in the world, just behind Houston-based Tricon Energy.

Univar is more of a regional player than Brenntag, posting two-thirds of its sales in the US. A third of its sales come from specialty chemicals.

Univar itself wrapped up a large acquisition in 2019 with the $2 billion purchase of Nexeo Solutions, the former Ashland distribution business. It has also been emphasizing its technical services, hosting an online innovation day in June to highlight its R&D centers, formulation labs, and development kitchens around the world.

In November, Brenntag said it planned to double its annual spending on mergers and acquisitions to around $500 million, noting a goal of consolidating the industry and improving its technical capabilities. A run at Univar, which has a market capitalization of about $5.5 billion, would be far more expensive than that.

Stock analysts at the investment firm Jefferies wrote to clients that a Brenntag-Univar deal would be “a sensible combination,” joining players that would command an 8% share of the global chemical distribution market. The new firm would have significant advantages over regional competitors and would “likely create a snowball effect for further industry consolidation,” they wrote.