M&A creates opportunities for distributors – NACD

18 March 2011 21:01  [Source: ICIS news]

NEW YORK (ICIS)--Mergers and acquisitions (M&A) among chemical producers and distributors will create opportunities for some distributors, the president of the National Association of Chemical Distributors (NACD) said on Friday.

With the push toward consolidation being driven by the large chemical distributors, “the current climate can create opportunities for smaller or emerging distributors, and even existing ones,” said Chris Jahn, president of the NACD, in an interview with ICIS.

“M&A in the distribution space can enhance service and product offerings to many manufacturers and customers. But just as importantly, they may also create opportunities for other distributors to enhance their product line and serve niche markets,” he added.

Germany’s Brenntag and US-based Univar – the No 1and 2 chemical distributors worldwide, respectively – have been aggressive in making acquisitions.

Univar completed buyouts of Turkish distributor Eral-Protek in March and Quaron’s distribution businesses in Belgium and the Netherlands in January. In December, it acquired US-based Basic Chemical Solutions.

In January, Brenntag acquired Germany’s Luwatec, while in September, it bought out the food, water-treatment and paper activities of Spanish distributor Productos Riba.

Large distributors, including US-based Nexeo Solutions, the former Ashland Distribution business, will continue to boost the size of their businesses through consolidation, Jahn said.

In addition, consolidation among chemical manufacturers also offers opportunities to distributors, he said.

“It is tougher for larger chemical companies to service smaller customers in a profitable way on their own. That creates opportunities for distributors,” Jahn said.

“We are as bullish as ever on the success of the chemical distribution model,” he added.

However, in the near term, distributors are facing challenges from commodity price inflation, he noted.

“Being the middleman, it’s always a challenge to pass on costs as quickly as possible and customers are pushing back,” Jahn said.

Paul Hodges studies key influencers shaping the chemical industry in Chemicals and the Economy

By: Joseph Chang
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