ESSEN (dpa-AFX) - Chemicals trader Brenntag no longer wants to buy U.S. rival Univar Solutions after public criticism from one of its shareholders. Brenntag had only confirmed at the end of November that it was interested in a takeover. The company "decided today not to continue these discussions," according to a one-sentence statement circulated Monday evening. Shareholder Primestone Capital had publicly opposed the plans a month after they became known.

The investment firm had called for the "immediate termination" of talks with Univar. At the time, Primestone held two percent of Brenntag shares. The Essen-based company had not commented directly on the demand, but stressed that it attached "great importance to an open and constructive dialogue with all Brenntag shareholders" in implementing the plan to increase value for the shareholders.

In Primestone's view, Brenntag should rather focus on improving its core business instead of a "high-risk" acquisition. To this end, the investor also called for a split-up of the company. The shareholder also criticized the lack of shareholder approval required for a takeover. The risks and imponderables were very high, as a careful review (due diligence) of a possible purchase had shown. Primestone assumed, for example, that synergy losses would be more likely to result, which would cancel out any cost reductions. Also, antitrust proceedings would probably be lengthy and difficult.

For its part, Primestone made demands in the letter which, in the activist investor's view, would enable Brenntag to polish up its balance sheet and increase its own stock market valuation from less than 60 euros at the time to 150 to 170 euros per share in three years. To achieve this, Primestone is also calling for a share buyback program worth 2.5 billion euros. Brenntag shares exited Xetra trading on Monday at 60.70 euros.

The statement had also said that after years of "disappointing performance" it was time to leverage the potential of Brenntag's two business units, Specialties and Essentials, by splitting them into two separate listed companies. This would also give investors the option to invest in just one of the two businesses and is expected to add significant value over time. "We believe this could happen within the next 18 months." Brenntag did not comment on these claims either.

For the Essen-based company, the acquisition of Univar would have been tantamount to a turning point, as the company had previously been known more for smaller acquisitions. At the time of publication of the plans, the market capitalization of the Americans was a good five billion US dollars - and thus only slightly less than half the valuation of Brenntag.

The company itself had been modest about acquisitions shortly before the plans were announced. A new growth plan up to 2026 had envisaged a significant improvement in operating results and more spending on acquisitions. However, only 400 to 500 million euros per year were planned, which would have meant twice as much as before. At the presentation of the plans, it was said that Brenntag wanted to buy in order to improve its market position and expand its position in emerging markets.

In an interview in the "Börsen-Zeitung", CFO Kristin Neumann also said on the subject of acquisitions: "Not everything fits and not everything makes financial sense. Therefore, despite the higher budget for acquisitions, "we will continue to proceed in a very disciplined manner".

Analysts had been mostly positive about the Germans' intentions. Chetan Udeshi of JPMorgan, for example, had described a possible takeover of Univar as strategically attractive. However, the resulting potential for Brenntag would ultimately depend on price and implementation. Baader expert Markus Mayer referred to the "enormous synergies" that a merger could unleash. The question was at what price the chemicals trader could get involved. Mayer expected a disciplined approach.

Laurence Alexander of Jefferies also reacted positively, calling a takeover logical. If this were to happen, the two largest chemicals traders in the world would merge, with a combined market share of around eight percent. Brenntag is the market leader, he said, with sales last year of 14.4 billion euros, followed by number two Univar, which had sales of $9.5 billion in the same period. A merger would bring significant competitive advantages over regional players at a time when the industry is facing an accelerating transformation - the analyst pointed to digitalization or new environmental and safety regulations, for example.

Barclays analyst Alex Stewart, on the other hand, had expressed skepticism. Strategically, a takeover of Univar would mean an about-face in the chemical distributor's priorities, which he sees as an unwanted distraction in an otherwise compelling investment story. From a financial perspective, a deal could make sense, the expert noted. However, the strategic logic behind it should be questioned.

On the stock market, the Dax company underperformed last year. The loss in 2022 was almost a quarter, while the index itself only lost a good twelve percent. Across Europe, the chemicals sector lost just under a fifth last year.

Investors welcomed the new development on Monday. Brenntag's share price was recently up four and a half percent on the Xetra closing price on the Tradegate trading platform./he