Azelis continues growth by acquisition

Filling the gaps

26 November 2008 00:00 [Source: ICB]

Availability of finance has slowed specialty chemical distributor Azelis's acquisition plans, but it is still snapping up businesses to continue its growth

GROWTH BY acquisition is still a pivotal part of pan-European distributor Azelis's strategy, despite the current economic turmoil and squeeze on financing.

Azelis CEO Hans Udo Wenzel said that UK private equity firm 3i, which holds 67% of the company, still fully supports its growth strategy and more acquisitions are in the pipeline.

Wenzel does concede, however, that the company has had to scale back its expectations for aggressive growth. "The availability of finance is very different than it was last year, and this has slowed our objectives down," he admits.

Azelis has nearly completed its portfolio in Europe, although the company still wants a foothold in Portugal, and to further strengthen its position in Turkey, following its purchase of Tara Kimya in January this year.

As well as filling holes in Azelis's portfolio, the acquisition last month of Austria-based Weinzierl's distribution business gives a boost to Azelis's life science offering.

Weinzierl, which is a focused distributor for German specialty chemical company Cognis in the Austrian region, is being renamed Azelis Austria, and will be a daughter company to Azelis Alpine.

"Weinzierl sits perfectly in our strategy of building up life sciences in Azelis Alpine," says Gerhard Meinel, managing director of Azelis Austria. He predicts sales growth of 5-6% next year in the Austrian life science business. "People still use shampoo, food and pharma products, despite the downturn," he says.

Azelis already distributes Cognis products in Denmark, Germany, Hungary and Spain, with specialist teams working just for Cognis. Azelis Austria also serves the coatings and performance chemical sectors, which Meinel says fit excellently with Swiss firm Schlegel & Meister, which Azelis bought in 2007.

Meinel says this will also provide Azelis with a platform to increase its market share in sectors including food, health, pharmaceuticals and animal nutrition, by exploiting synergies with other Azelis companies.

Azelis is also on the brink of completing another purchase in India. A first step was made in September 2007, with the purchase of a 49% stake in Indian polymer and chemical distributor Marigold International, and Wenzel says that he expects to announce a new acquisition by the end of the year.

Sales in India amounted to €13.8m ($17.4m) from January to August 2008, with the pharma, coatings and chemical industries businesses being the strongest performers.

As well as making bolt-on acquisitions, Azelis still wants to further develop its presence in certain business sectors by maximizing synergies across its diverse portfolio.

These include rubber/composites, where Wenzel expects some interesting developments in the next two years, coatings in Russia, and cosmetics in Italy.

The broad diversity of its portfolio, with a strong bias toward life sciences, and broad regional spread, has helped to cushion the impact from the downturn in demand.

Wenzel hopes Azelis will achieve its budget this year and is moderately optimistic for 2009. Although its goal of achieving €2bn in sales by 2010 looks unlikely now, Wenzel expects to reach at least €1.5bn in the next two years (sales were €1.1bn in 2007), giving rise to the possibility of a future flotation.

He expects 3i to remain as an equity partner in the normal course of the company's development. Indeed as Azelis has grown, Wenzel has had to modify its business model to a more corporate structure, introducing central functions such as human resources and creating international business directors.

This has created more complexity, but Wenzel does not want to lose Azelis's entrepreneurial and flexible approach, which he views as a point of differentiation.

The strategy has paid off so far, with the seven-year-old company already Europe's fourth-largest distributor by sales.

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Author: Elaine Burridge
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