The IPO, if successful, will give Brenntag a much-needed injection of capital and scope to grow organically and through acquisitions. The company is already strong in the US and Europe, and would most likely end up facing questions from competition authorities if it tried further major acquisitions there.
But it has big holes in Asia: it does not have a big presence in India and China, for example. Apart from a subsidiary in Taiwan and some branch offices, Brenntag’s main assets in Asia are the $400m sales distribution business of French chemical group Rhodia, which it purchased in September 2008.
This division has operations in Australia, India, Taiwan and the ASEAN countries of Indonesia, Malaysia, Philippines, Singapore, Thailand and Vietnam. It sells a range of chemicals including adhesives, coatings, elastomers and sealants to industries related to personal care, food, animal feed and electronics.
It added a new operation in Hong Kong during 2009, according to its website.
German newspaper Frankfurter Allgemeine reported chief executive Stephen Clark as saying more acquisitions are planned as the market continues to consolidate. He said Brenntag may buy large rivals in Asia, and these buys could be worth considerably more than its usual acquisitions, while remaining under E100m per transaction.
The report said the main reason for Brenntag’s planned IPO is to strengthen the company’s capital base in order to help finance future growth. The report said that since 2007, Brenntag has acquired 21 companies with a combined value of E230m. The newspaper reported that Brenntag will also be able to reduce its debts thanks to the capital increase that will form part of its upcoming IPO. The daily cited Clark as saying that the IPO, slated to happen in the coming few weeks, will involve a E500m capital increase.
According to CEO Clark, quoted in the Financial Times, the company’s earnings before interest, tax, depreciation and amortisation rose by more than 17% in the past five years. Its EBITDA margin came in between 5 and 7.5% in those years. In the past year, the group managed to hold its operating profit almost steady at €477m, despite a revenue drop of 14% to €6.4bn.