The chemical dealer is being harassed by activist investors.
(Photo: IMAGO/Rupert Oberhäuser)
Dusseldorf A few weeks after the sharp confrontation with activist investors, the chemicals dealer Brenntag announced a new management structure. The group board of directors will be reduced and the operational management should be shifted more to the two large segments “Essentials” and “Specialties”, the Dax group announced on Thursday morning.
Brenntag is thus taking the next step in a fundamental reorganization. The group has already divided its business into two segments: one for the distribution of bulk chemicals (Essentials) and one for specialty chemicals (Specialties). The two entities will now have significantly more autonomy with independent CEOs and a new division.
The group is under pressure from activist investors who are demanding a quick split and expect an increase in value from this. The dispute culminated in a turbulent general meeting in mid-June. The British hedge fund Primestone had nominated two of its own candidates for the board of directors in order to emphasize its demands.
The plan failed, the two Supervisory Board candidates nominated by Brenntag only received a narrow majority of 62 percent of the shareholder votes. Primestone then announced that it would remain invested in Brenntag. Recently, however, there have been no more contacts with Brenntag management, according to financial circles.
Brenntag’s corporate circles reject the impression that the announced reorganization is a reaction to the hedge fund attack. The conversion has been planned for months and follows the strategy announced last year to bring the different businesses closer to the needs of customers and suppliers.
“Brenntag has now reached a point in the transformation where the priority is to implement the strategy along a clearly defined plan,” Brenntag CEO Christian Kohlpaintner is quoted as saying in a press release.
Where this plan will ultimately lead is unclear. In fact, Brenntag is taking a step in the direction of splitting up, as demanded by the investor activists: the divisions will become independent, the head office will develop more into a management unit of the kind known from holding companies – with overarching tasks relating to strategy, capital distribution and personnel development.
According to company circles, however, it is unclear whether the restructuring will actually result in a split. All options are on the table, including the structure of a classic holding company. CEO Kohlpaintner has always emphasized internally that he wants to gradually develop the world’s largest chemicals dealer and not be tempted to make hasty announcements.
The fact that Brenntag is already presenting the next strategic step is probably also due to the dispute with the activist investors. The group had initially planned the next announcement for the capital market day in autumn. But shareholders should get a taste of it now.
Brenntag has to convince US funds
Above all, the group has to convince the Anglo-Saxon funds of its own plan and speed. Many of them had backed Primestone at the general meeting. Brenntag was only able to push through its supervisory board candidates because large German investors supported the management.
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In late autumn, the shareholders should find out how Brenntag is doing in terms of group structure. Then “conclusions on the future path for Brenntag and the divisions will be announced,” said CFO Kristin Neumann. However, the reorganization that has now been announced provides the first indications of this.
The two segments are to work as independent companies from next year. The “Specialties” division will be headed by Michael Friede as CEO from August. He was appointed to the Group Board of Management just three months ago. Brenntag does not give exact sales figures, according to analysts’ estimates, the segment accounts for around 40 percent of the group’s sales of 19 billion euros.
Ewout van Jarwaade, who is currently Chief Transformation Officer, will take over the bulk business Essentials. Both CEOs will lead their own executive committees in the divisions.
New Unit for Life Science
The challenges are especially great for peace. In terms of profitability, the special segment lags behind the competitors in the chemical trade who are focused on this business. The 43-year-old will reorganize the division: A separate unit (“Life Science”) is to be created for the lucrative business involving the sale of preliminary products for medicines, cosmetics and food. This should increase transparency for investors.
Starting in August, the Brenntag Management Board will now consist of four members. Steven Terwindt, who is currently responsible for the “Essentials” business, is leaving the group. In addition to CEO Kohlpaintner and the two heads of division, CFO Neumann remains on the executive committee.
More: Activist investor fails at Brenntag – now a legal dispute is imminent