Univar Inc. agreed last week to acquire Nexeo Solutions Inc. in a $2 billion deal uniting giant global chemical companies that supply wide varieties of ingredients to the lubricants industry. The transaction is expected to close during the first half of 2019.
Officials said the deal will help the combined company by giving greater scale while also enabling cost savings. The companies combined revenue for the past 12 months totals $12.5 billion, and their combined adjusted earnings before interest, tax, depreciation and amortization was $843 million.
Univar claims the acquisition will create the worlds largest chemicals and ingredients distributor in terms of profits.
The transaction is expected to broaden our product portfolio, bringing additional brands and product lines to our combined customer base in in several end markets, including lubricants, said Dwayne J. Roark, Univars senior director of corporate communications.
Univar is a distributor of chemicals and ingredients, while Nexeo distributes chemicals and plastics. Univar recorded net revenue of $8.5 billion over the past 12 months, while Nexeos was $4 billion during the same period. Both companies describe themselves as global, though their greatest presence is in North America. Univar is headquartered in Downers Grove, Illinois, and Nexeo in The Woodlands, Texas.
Univar and Nexeo both distribute for a long list of suppliers, including numerous companies that provide lubricant additives and base stocks, as well as finished lubricants. Nexeos current distribution portfolio includes Akzo Nobel, Arkema, BASF, Calumet Specialty Products, Clariant, Dow Chemical, Eastman Chemical, Flint Hills Resources, Ineos, Oxea, Sonneborn, Dover Chemical, Perstorp, TPC Group, Kraton Polymers and Zschimmer & Schwarz.
Univars suppliers include BASF, Calumet, Dow Chemical, TPC Group, Kraton Polymers and Zschimmer & Schwarz. Company brands include Dow Performance Silicones, Soltex, Renkert Oil, Shrieve Chemical, Neste Oil, San Joaquin Refining, Huntsman and Stepan.
The companies did not discuss plans for streamlining suppliers or product offerings, though they did mention the possibility that Nexeos plastics business will be divested.
We expect the transaction to be accretive to earnings and cash flow beginning in the first full year post closing, and to generate $100 million of annual run rate cost savings by the third year following close and reduce annual capital expenditures by $15 million immediately, Univar President and CEO David Jukes said.
According to their statement, the transaction would be accomplished by converting each share of Nexeo stock into 0.305 shares of Univar common stock and $3.29 in cash, subject to adjustment at closing. That amounts to a purchase price of $11.65 per share of Nexeo common stock, based on Univars closing price on Sept. 14.
The companies said they expect one-time integration costs of approximately $150 million, which will be largely offset by surplus real estate sales and working capital improvements. The deal is subject to shareholder approval from both companies, in addition to regulatory approvals and customary closing conditions. Nexeos key stock holders TPG and First Pacific have already provided consent for the acquisition.
Jukes would stay on as the combined companys president and CEO, and Steve Newlin will continue as the executive chairman. There was no comment about Nexeo CEO David Bradleys role in the combined company.