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Newsletter 17, September 2006 (No comments so far)
The industry is reshaped by dynamic investors on the prowl for private owners and producers
This article was published by ICIS Business News
in London on September 4th 2006.
Over the last two years, the vast majority of chemical distributors' acquisitions in Europe and in the US were completed by distributors owned by private equity, mostly through "buy-and-build" strategies, which are significantly reshaping the industry.
Much of the action has been dominated by Brenntag. In the past 12 months, the group has expanded its US presence with the acquisitions of JAM Distribution, Quadra USA and LA Chemicals. With 110 sites in the US, Brenntag now has more sites for bulk and dry chemicals than any direct competitor, and the company is expected to achieve US sales of more than $2.5bn this year, making it the region's third-largest player.
The group's expansion has extended into Europe, with the acquisitions of Albion, Schweizerhall Chemie and Herkommer und Bangerter. Schweizerhall Chemie is the top distributor in Switzerland, and Albion the number two in the UK. Along with the earlier takeovers of Puma, Aquacryl, Chem On and Groupe Alliance in North Africa, these latest moves complete Brenntag's market coverage and enhance its European market leadership on the bulk and speciality chemicals markets.
Brenntag's new owner BC Partners is expected to support this strategy of buy and build, and it has already announced plans to seek an exit from its investment through an IPO.
Azelis, owned by Electra Partners Europe of Frankfurt, first appeared on the speciality chemicals distributor markets in Italy in 1997. Since then, it has completed 25 acquisitions in Europe, six of them after 2004 - becoming number three in chemical distribution in Europe behind Brenntag and Univar. It has more recently brought into the fold Broste in Scandinavia, Sibeco and Sepulchre in the Benelux and Impex Quimica in Spain.
IMCD, owned since July 2005 by ABN Amro Equity, has completed three acquisitions in recent months, and it is a leading player for speciality chemicals in Europe and Australia. Its acquisitions of Pebepol in the Netherlands and Brian Jones in the UK strengthen its European position, while the acquisition of Solvadis South Africa gives it a position in the fast-growing South African market, in addition to an already significant market presence in Australia and New Zealand.
Quaron, owned since 2003 by Bencis, is another example of the buy-and-build strategy, having acquired Holvoet Chemie in Belgium and Solvadis France and Netherlands. In 2005, sales reached €250m, almost doubling over the past three years as a result of organic growth and acquisitions.
Finally, last year saw Univar enter the Polish food ingredients market, with the acquisition of privately held enzyme distributor Mapol. Absorbed into the Fiske unit and active for about 10 years in Poland, Mapol distributes a full range of enzymes for food and nonfood applications. Yet other European PE deals include CG Chemical Group's acquisition of Thommen Furler in Switzerland Caldic's acquisition of Solvadis Iberica Indukern Spain's acquisition of Rafael Ors and Villaran and Nordmann Rassmann's purchase of Kemi Interessen in Sweden.
RESHAPING THE INDUSTRY
Undoubtedly, private equity investors are reshaping the chemical distribution industry by dynamically acquiring companies from private owners, chemical producers and conglomerates. Such private-equity-owned distributors have the advantage of concentrating solely on the business fundamentals: they motivate the management to focus on financial performance and on growth while keeping a close attention to fixed and variable costs.
As these examples show, fluctuating corporate ownership is less important than having in place a strong management team, human and financial resources available for growth and a well-defined long-term strategy. These are the business drivers that will allow distributors to overcome the challenges created by Reach, the need to actively seek new supply sources and cope with rising logistics, packaging and insurance costs.
in London on September 4th 2006.
Over the last two years, the vast majority of chemical distributors' acquisitions in Europe and in the US were completed by distributors owned by private equity, mostly through "buy-and-build" strategies, which are significantly reshaping the industry.
Much of the action has been dominated by Brenntag. In the past 12 months, the group has expanded its US presence with the acquisitions of JAM Distribution, Quadra USA and LA Chemicals. With 110 sites in the US, Brenntag now has more sites for bulk and dry chemicals than any direct competitor, and the company is expected to achieve US sales of more than $2.5bn this year, making it the region's third-largest player.
The group's expansion has extended into Europe, with the acquisitions of Albion, Schweizerhall Chemie and Herkommer und Bangerter. Schweizerhall Chemie is the top distributor in Switzerland, and Albion the number two in the UK. Along with the earlier takeovers of Puma, Aquacryl, Chem On and Groupe Alliance in North Africa, these latest moves complete Brenntag's market coverage and enhance its European market leadership on the bulk and speciality chemicals markets.
Brenntag's new owner BC Partners is expected to support this strategy of buy and build, and it has already announced plans to seek an exit from its investment through an IPO.
Azelis, owned by Electra Partners Europe of Frankfurt, first appeared on the speciality chemicals distributor markets in Italy in 1997. Since then, it has completed 25 acquisitions in Europe, six of them after 2004 - becoming number three in chemical distribution in Europe behind Brenntag and Univar. It has more recently brought into the fold Broste in Scandinavia, Sibeco and Sepulchre in the Benelux and Impex Quimica in Spain.
IMCD, owned since July 2005 by ABN Amro Equity, has completed three acquisitions in recent months, and it is a leading player for speciality chemicals in Europe and Australia. Its acquisitions of Pebepol in the Netherlands and Brian Jones in the UK strengthen its European position, while the acquisition of Solvadis South Africa gives it a position in the fast-growing South African market, in addition to an already significant market presence in Australia and New Zealand.
Quaron, owned since 2003 by Bencis, is another example of the buy-and-build strategy, having acquired Holvoet Chemie in Belgium and Solvadis France and Netherlands. In 2005, sales reached €250m, almost doubling over the past three years as a result of organic growth and acquisitions.
Finally, last year saw Univar enter the Polish food ingredients market, with the acquisition of privately held enzyme distributor Mapol. Absorbed into the Fiske unit and active for about 10 years in Poland, Mapol distributes a full range of enzymes for food and nonfood applications. Yet other European PE deals include CG Chemical Group's acquisition of Thommen Furler in Switzerland Caldic's acquisition of Solvadis Iberica Indukern Spain's acquisition of Rafael Ors and Villaran and Nordmann Rassmann's purchase of Kemi Interessen in Sweden.
RESHAPING THE INDUSTRY
Undoubtedly, private equity investors are reshaping the chemical distribution industry by dynamically acquiring companies from private owners, chemical producers and conglomerates. Such private-equity-owned distributors have the advantage of concentrating solely on the business fundamentals: they motivate the management to focus on financial performance and on growth while keeping a close attention to fixed and variable costs.
As these examples show, fluctuating corporate ownership is less important than having in place a strong management team, human and financial resources available for growth and a well-defined long-term strategy. These are the business drivers that will allow distributors to overcome the challenges created by Reach, the need to actively seek new supply sources and cope with rising logistics, packaging and insurance costs.
Private Equity owned distributors' acquisitions, 2004 to July 2006
| Company name | Private equity owners | Number of completed M&A transactions | Name of acquired companies |
| Brenntag | Bain Capital sold Brenntag in July 2006 to BC Partners, after the initial buyout from Deutsche Bahn (DB) in 2003 | 3 in US 7 in Europe | JAM Distribution, Quadra USA, LA Chemicals Puma, Chem On, Aquacryl Albion, Herkommer und Bangerter, GroupeAlliance Schweizerhall Chemie |
| Azelis | Electra Partners Europe since 2003 | 6 | Sibeco, Sepulchre, Broste, Impex, Pan Polymers, Polymers Direct |
| IMCD | Alpinvest N.V sold IMCD in July 2005 to ABN-Amro Equity | 4 | Pebepol B.V, Brian Jones, Solvadis South Africa Optima |
| Solvadis | Orlando & SSV Equity funds since June 2004 | Sold most Solvadis companies | Sold Bottrop site, Solvadis F/NL, Spain, South Africa |
| Safic Alcan | MG Technologies sold to DMLD & Alpha Associes in 2003 | 1 | Nordica (Sweden) |
| Quaron | Nesbic NV since 2002 | 4 | Chemimpo Holvoet Chemie Solvadis France/Apex Cleaning (Netherlands) |
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