Urethane Blog
More Drama in Distribution
December 6, 2023
Brenntag reshuffles business amid calls for full break-up
By Tristan Veyet and Matteo Allievi
December 5, 20237:40 AM ESTUpdated 2 days ago
Dec 5 (Reuters) – German chemicals distributor Brenntag (BNRGn.DE) said on Tuesday it would reorganise its business into two independent divisions from 2024 as it faces pressure from activist investors to break up the company.
The group’s shares were down 1.6% at 1012 GMT. Analysts had expected a muted share price reaction after no clear split was announced.
In the reshuffle, Brenntag’s essentials unit, a wholesale business for process chemicals, and the specialties arm, which provides services to industries such as nutrition and household products, will each have their own legal structure and leadership.
Brenntag said ahead of its Capital Markets Day event that the structural changes would give the company more options and make it ready for the next strategic steps by 2026, but did not specify what those steps might be.
“Split between two divisions is one option but there could be also other options,” CEO Christian Kohlpaintner said during a press conference.
Brenntag’s management has faced increasing pressure for a break-up of its businesses and a spin-off of the specialties unit from activist investors who have argued the separation would boost the company’s shares.
“There is really no catalyst to buy the shares unless Brenntag announces a clear split of the two divisions before 2026,” Alster analyst Thomas Wissler said.
Brenntag is the latest in a series of old and famous German companies, such as Bayer (BAYGn.DE) and Thyssenkrupp (TKAG.DE), that have been targeted by activist investors to divest part of their business to improve profitability.
As part of the reorganisation, Brenntag will transfer all pharmaceutical activities from the essentials arm to the specialties unit, while moving water treatment and finished lubricants businesses along with some semi-speciality products in the opposite direction.
As a result, the specialties division will account for 30% of the group’s gross profits, while essentials will make up the rest.
Brenntag said it aimed to grow its organic earnings before interests, taxes and amortisation by 7-9% per year until 2027, with 5-7% growth in essentials and 7-9% growth in specialties.
($1 = 0.9240 euros)
(This story has been corrected to attribute descriptions of divisions to correct business units, in paragraph 3)
Reporting by Tristan Veyet and Matteo Allievi in Gdansk; editing by Milla Nissi and Sharon Singleton
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