By Geoffrey Smith
Investing.com -- Univar (NYSE:UNVR) stock leaped in premarket trade on Monday after German rival Brenntag AG (ETR:BNRGn) said on Friday it had held preliminary talks with the chemicals company about a potential merger.
Brenntag, which specializes in specialty chemicals and ingredients, is looking to expand its presence in the U.S., not least to hedge its geographical risk after being caught along with the rest of German industry in a vicious input price squeeze caused by Russia's invasion of Ukraine earlier this year.
Brenntag Chief Executive Christian Kohlpaintner this month said the company plans to double its annual spending on M&A, with a focus on the North American market. It announced the acquisition of Tech Management (dba), an oilfield services provider based in the Permian basin, earlier this month. Univar has a broader range of operations than Tech Management, supplying chemicals to a range of industries from food processing to metalworking.
Univar had confirmed a preliminary indication of interest from Brenntag in a statement on Friday, without giving additional details.
A strong presence in North America had helped Brenntag to report a better than expected profit for the third quarter. At the same time, it also said it expected full-year earnings before interest, taxes, depreciation, and amortization to be in the upper half of a range between €1.75-1.85 billion (€1=$1.0463) this year.
Brenntag's stock price went in the opposite direction to Univar's on Monday morning in Frankfurt. By 07:20 ET (12:20 GMT), Brenntag stock was down 7.2% at a two-week low, the worst performer in the benchmark DAX index.