The U.S. subsidiary of Rotterdam, Netherlands-based chemical distribution company Univar N.V.entered into an agreement to acquire all the shares of Chemcentral Corp. for $600 million in cash, including assumed debt, uniting two chemical distributors who work with products involved in lubricants, lubricant additives and metalworking fluids. On Monday, however, Univar announced that Chemcentral received a competing, non-binding $700 million acquisition proposal from Brenntag Holding GmbH, an industrial and specialty chemicals distributor based in Germany, leaving open the possibility of a bidding war for Chemcentral.
Brenntags competing offer is an expression of interest and not a definitive offer, Chemcentral Senior Vice President of Sales and Marketing Phil Scafido told Lube Report. Its possible no definitive offer will materialize – thats the key thing. We are proceeding with our current plans at this point in time to merge with Univar.
Univar and Chemcentral said they expect their merger, announced March 12, to close early in the second quarter. Until that time, we remain separate companies, and will continue to conduct business as usual, Chemcentral President and Chief Executive Officer John Yanney told customers and suppliers in letters that are posted at the companys Web site. For now, and after the closing, we anticipate no change or disruption to your operations.
A privately held company based near Chicago, Chemcentral is a distributor of both specialty and commodity chemicals and has distribution centers located throughout the United States, and selected sites in Mexico, Canada, South America, Australia and the Caribbean. It also has joint ventures in China, Southeast Asia/South Pacific, India and the Middle East. The companys targeted key markets include lubricants and metalworking fluids; paint, coatings and inks; adhesives, caulks and sealants; household, industrial, and institutional cleaning; personal care and cosmetics; and rubber and plastic compounding.
Its sales are derived primarily from its North America operations, with more than 90 percent of 2006 revenues attributable to its U.S. business. Chemcentral operates 45 stocking locations and four regional centers in North America, with another 25 international warehouse locations, and has approximately 1,000 employees.
Chemcentrals Scafido explained that Univar and Chemcentral each has a customer base in the lubricants and metalworking fluids arena, and believe the combined businesses can offer their product lines to a much bigger customer base. Additionally, weve got an additive line from Infineum, he said. We offer polyalphaolefins and polybutenes from Ineos Oligomers. So thats also going to be a significant opportunity to expand that customer base. He added that the company is also a representative for BASF, including its polyalklylene glycols.
Scafido said historically Univar has featured a broad offering of metalworking products, including amines, preservatives and biocides. I think that would potentially offer some benefit to us, he added.
Univar also has an environmental services business, which Scafido said will bring value to the combined businesses.
Univar is an independent distributor of industrial chemicals, operating throughout North America and Europe. The company said it has about 250,000 industrial customers, with a full portfolio of products. The majority are commodities that the company buys in bulk, then processes, blends and repacks. Products include monomers and intermediates, acids and bases, surfactants and solvents, and process chemicals.
Companies represented by Univar include Arkema, Calumet, Chemtura, Chevron Phillips Chemical, FMC Lithium, Penreco, Quaker Chemical, Uniqema and many others.
The company, which had sales in 2006 of $6.6 billion, also provides a number of related services, both to its customers and suppliers, such as blending, managing customer inventories, packaging, labeling, warehouse management, waste management, technical support and managing vendor reduction programs. It operates 160 distribution centers, located throughout the United States, Canada and 18 European countries. Univar has 6,900 employees throughout North America and Europe. Univar USA is based in Redmond, Wash.
Univar said the addition of Chemcentral is expected to create significant marketplace synergies for the combined organization.
Chemcentral brings to our combined organization a diverse customer base in North America with a complementary product set that provides significant opportunities for cross-selling amongst our respective customer bases, said Univar Chief Executive Officer Gary Pruitt. Furthermore, Chemcentral provides Univar an attractive position in a number of rapidly growing international markets where we are currently underrepresented.
The merger plans received a curveball Monday when Univar said it received notice that Chemcentral received a non-binding $700 million acquisition proposal from Brenntag Holding GmbH, an industrial and specialty chemicals distributor based in Germany.
If Chemcentrals board of directors determine that Brenntags competing proposal is superior, Univar said, Chemcentral must give Univar advance notice of three business days, during which Univar may decide whether it wants to negotiate with Chemcentral to make adjustments in the merger agreement. According to Univars announcement, Chemcentral may terminate the merger agreement with Univar in favor of a competing offer if it pays Univar a $22 million termination fee.