Azelis confirms plans for 2017-19 IPO
Will Beacham
15-Jul-2016
BARCELONA
(ICIS)–Distributor Azelis may go through an initial public
offering (IPO) and stock market floatation as early as
2017-19, according to its chief executive officer Hans
Joachim Muller.
The company, which grew significantly
through the acquisition of US-based Koda Distribution Group
in December 2015, should be ready for the strategic move by
the end of 2016.
“Koda is an important milestone towards
our IPO, and we’re working towards being ready by the end of
2016. Then the IPO should take place between 2017-19
depending on three things: performance of the business;
strategy of our owners, Apax; and the financial markets have
to be ready,” Muller said.
Private equity group Apax acquired Azelis
from 3i in 2015. Muller said that a lot of banks have
expressed an interest in discussing the IPO plans, but for
now the group is focussed on running and growing the
business.
“We can influence the performance of our
business but the other two aspects are for the owners and the
market. It will not be as late as 2022-23 and could be as
early as 2017. From an accounting and reporting perspective
we will then be ready,” he added.
The Koda deal was signed on 17 October
2015 and closed on 17 December. Muller says that the due
diligence his team did when analysing the deal has turned out
to be correct. A danger when one distributor acquires another
is the chance that competing suppliers of the same product
come into the portfolio. With this deal, though, there are
synergies rather than dis-synergies between suppliers, he
claims.
The integration was completed at the end
of June from a business point of view. Although
enterprise resource planning systems are not yet identical
across the merged group, communication about the monthly
financial accounts happens very quickly, he said.
Individual countries operate
independently. For annual budgets, national operating units
make a proposition in line with company strategy during the
summer and the third quarter and are finalised by early
October.
Azelis is looking at several potential
mergers & acquisitions (M&A) targets and Muller hopes
some may come to fruition by the end of the year. M&A is
used to strengthen existing areas but not to enter completely
new ones. Geographic focus is Europe and the Americas.
“We’re not excluding a deal in Asia but our focus is driven
by our commitment to our principals that we’re completely
compliant,” he said.
Muller says investors are wary of
expansion by M&A in Asia because of the high level of
volatility there.
“What are the risks in China? How stable
is it? We like Japan from a business point of view but what
about its age profile as it relates to how much people
consume? How long can Japan continue with their monetary
policy?” he said.
Despite the challenges, Azelis is growing
strongly in Asia with a focus on organic expansion. So far in
2016 Asia growth is more than 20% higher than the same period
in 2015, fuelled by an expanding network of technical
services laboratories. There are eight in Asia and a coatings
lab is planned to open in India during
2016.
He says Azelis has got Asia covered with
its existing business, adding that it is important to be
there because of growth potential when you consider that most
of its population are comparatively young.
In August 2016 Laurent Nataf, Europe
chief operating officer, will transfer to become CEO for Asia
to ensure enough attention is given to building the business
there. He will be succeeded as chief operating officer EMEA
by Anna Bertona.
Muller expects to see some organic revenue
and profitability growth in 2016. But it is difficult to grow
organically when commodity prices are falling as this impacts
revenues and profits.
Although primarily a specialty
distributor, around 15-20% of the company’s portfolio is
commodities, enabling Azelis to offer a comprehensive product
portfolio for each value chain it serves.
“We’ll see quite an increase in
profitability in EMEA and the Americas and very much so in
Asia which is the strongest growth region for us.”
Organic expansion is continuing into new
geographies. On 1 February an office opened in New Zealand
which will be earnings-accretive this year. In 2015
Azelis took its first step into Africa, opening an office in
Morocco. It expects to open one in Ivory Coast in September,
and there are plans for others in Ghana, Nigeria and Ethiopia
this year.
He points out that Ethiopia has a
population of 98.6m and has grown at over 10%/year for the
past 11 years.
“A lot of what we’ve seen in southeast Asia over the last 20
years we will see in Africa eventually. The Chinese did a lot
of infrastructure investment there and it is working well;
being an early entrant is an advantage,” he said.
Although in Europe and the US the
population is aging, immigration is helping a great deal to
boost the numbers of young consumers, says Muller. In
Germany, for example, 25% of the young people were not born
in Germany. In the US 1%/year GDP growth is caused by
immigration.
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