Univar, Brenntag call off merger talks

Two of the world’s largest chemical distributors, Germany’s Brenntag and US-based Univar Solutions, have called off merger talks. Univar says it is now entertaining overtures from other parties.

The firms acknowledged on Nov. 25 that they were in negotiations about a possible Brenntag acquisition of Univar. Brenntag is the world’s largest chemical distributor, with $14.9 billion in 2021 sales; Univar, which had $9.5 billion in sales that year, is the third largest. Both firms have increasingly been emphasizing value-added offerings, such as technical service, in addition to the delivery of chemicals.

The scuttled talks aren’t necessarily the end of the line for a deal involving Univar. In a statement, the company says it “will continue discussions relating to other indications of interest that have been received with respect to a potential transaction.”

Univar appears to be following the advice of Engine Capital, an activist investor that owns 1% of Univar’s stock. In November, days after the talks with Brenntag were disclosed, Engine sent a letter to Univar’s board noting that it was “pleased to learn” of the merger talks. However, the letter went on to “urge you to publicly announce a competitive and formal sale process that invites additional parties to bid for the company.”

Engine estimated that Univar could fetch between $38 and $44 per share in a takeover, which would value it between $6.4 billion and $7.5 billion. It also noted that interest could extend beyond competitors like Brenntag. “Private equity has been actively involved in the space, including through past ownership of both Univar and Brenntag,” it said.