March 1st, 2010
Brenntag prepares for IPO
Brenntag prepares for IPO: Corporate announcement/Debtwire 26.02.10
- Global market leader in chemical distribution is planning to list on Frankfurt stock exchange’s Prime Standard in the first half of 2010
- Issuing of new shares from capital increase of approximately EUR 500m planned in addition to placement of old shares
- Chemical distribution market offers above-average growth opportunities through organic growth and acquisitions
- Deutsche Bank and Goldman Sachs acting as global coordinators and together with BofA Merrill Lynch and J.P. Morgan, as bookrunners
Brenntag, the global market leader in full-line chemical distribution, is preparing for an initial public offering. The company intends to be listed on the Prime Standard of the regulated market of the Frankfurt stock exchange already in the first half of 2010. Deutsche Bank and Goldman Sachs have been appointed as global coordinators. Alongside the global coordinators, BofA Merrill Lynch and J.P. Morgan are acting as additional bookrunners. Brenntag will use the expected proceeds of the IPO primarily to strengthen its equity capital base and expand its market presence in growth markets such as Asia, Latin America and Eastern Europe.
Brenntag is the global market leader in chemical distribution, providing more than 150,000 customers worldwide with distribution solutions for a wide range of industrial and specialty chemicals. Linking chemical producers and customers, Brenntag enables efficient management of the supply chain. The company purchases large quantities of industrial and speciality chemicals from its suppliers, provides short-term storage, often repackaging into smaller quantities, and provides one-stop access to a full-line of chemicals in less-than-truckload quantities to its customers. The product portfolio includes more than 10,000 chemicals as well as services such as just-in-time delivery, mixing and blending, formulation, repackaging, inventory management, drum return handling and technical services.
Resilient business model and flexible cost structure facilitate stable financial profile
Brenntag’s robust business model is based on complete geographic coverage and diversity across industries, customers, products and suppliers. This independence from individual products, industries or regions has enabled Brenntag to deliver an average EBITDA growth of 17 % over the last five years. Even during the 2009 crisis, the company’s profitability remained stable. Brenntag reported sales of EUR 6.4bn and an EBITDA of EUR 477m for the 2009 fiscal year. While EBITDA remained virtually constant (2008: EUR 481m), the decline in sales of 14 % (2008: EUR 7.4bn) can be attributed primarily to price reductions.
Brenntag benefits from outsourcing trend
Brenntag operates in a market with above-average growth opportunities. Between 2006 and 2008 the market for chemical distribution grew by an average of 10 % per year to EUR 115bn today, clearly outperforming chemical production (8.5%). One main driver is the trend towards outsourcing. As chemical producers are often unable to serve small and midsized customers in a cost-efficient manner, they frequently transfer these customers to chemical distributors. The same is true for chemical processing companies, who seek specialised distributors to perform increasingly complex functions formerly conducted in-house. Brenntag CEO Stephen Clark remains confident that this development will continue even more markedly in the wake of the economic crisis: “To save costs, chemical producers are increasingly passing small customers as well as orders on to distributors in order to continue focusing on their own core skills in research and development, production and the distribution of high quantities to bulk purchasers. As a market leader in chemical distribution with a global presence, we are well-positioned to benefit from this trend.”
Highly fragmented market offers attractive acquisition opportunities
At the same time, Brenntag aims to continue to grow by means of strategic acquisitions in what is generally a highly fragmented chemical distribution market. At the end of 2008, the five largest distributors worldwide had a combined market share of just less than 19 %. This implies that the global market for chemical distribution by third parties, with a total volume of approximately EUR 115bn, offers attractive growth opportunities through acquisitions. To this end, Brenntag can build on its own successful track record, having acquired 92 businesses since 1991 – 21 of those alone since 2007. The company expects to continue pursuing this strategy, with particular focus on the fast-growing markets Asia, Latin America and Eastern Europe and seeks to consistently enhance its global market leadership.
Expected proceeds strengthen equity capital base
Brenntag plans to place newly issued shares in addition to the placing of old shares. With the expected proceeds from this capital increase of approximately EUR 500m, the company will strengthen its equity capital base.
Previously followed growth strategy will be continued
As in the past, Brenntag will continue to focus on achieving profitable growth both organically and through acquisitions. “As a global market leader with a strong regional presence, we are excellently positioned to actively move ahead as a leading industry consolidator. Listing our shares on the stock market is the logical next step in our growth strategy as it equips us with the means to further build on our leading platform,” says CEO Stephen Clark.
Comment: The data quoted here come from a recent Boston Consulting report which include several flaws and imprecisions: The report called "Opportunities in Chemical Distribution" seems to add both the chemical and polymer markets. Five distributors are mentioned namely Brenntag, Univar, Ashland, Helm and finally Ravago who is not a chemical distributor but a polymer distributor, trader, and compounder. If you add together the polymer and chemical distributor markets, the sum of both markets looks bigger and the market share of each distributor smaller.