Dax group Brenntag threatens defeat in the supervisory board election in June

burning day

The chemical trader wants to reorganize its supervisory board.

(Photo: IMAGO/imagebroker)

Dusseldorf The chemicals dealer Brenntag is coming under increasing pressure from its shareholders. At the upcoming general meeting on June 16, the candidates proposed by the group for the new supervisory board may not get a majority. Because the activist investor Primestone Capital, which has put up two opposing candidates, is getting help from influential sources.

The American voting rights advisor ISS has spoken out against the election of the two Brenntag candidates and recommends investors to vote for the two managers proposed by Primestone. This intensified the dispute between the Essen-based group and the British hedge fund, which is calling for Brenntag to be split up.

Primestone itself holds only two percent of the shares and correspondingly few voting rights. But many Anglo-Saxon funds base their votes at general meetings on the recommendations of major advisors such as ISS.
The recommendations of ISS have already had a drastic effect in the past – for example with the vote of no confidence in Bayer CEO Werner Baumann at the Annual General Meeting 2019. The second major American voting rights advisor, Glass Lewis, has not yet made a recommendation for the Brenntag Annual General Meeting (AGM).

Brenntag’s proposal provides for the re-election of Richard Ridinger, who is then also to take over the chairmanship of the supervisory board. The previous chief inspector Doreen Nowotne is retiring from the post. Suja Chandrasekaran is to be newly elected to the Supervisory Board.

Primestone spoke out against the appointment of Ridinger and Chandrasekaran and put up two opposing candidates with Geoff Wild and Joanna Dziubak. Wild used to run the German specialty chemicals and equipment company Atotec, and Dziubak is a former employee of the US investment bank Goldman Sachs.

Primestone calls for split

If his two candidates entered the supervisory body, the activist investor’s demands for a change in strategy at Brenntag would suddenly gain more weight. Primestone is calling for the chemicals trader to be split into two separate companies: one for bulk business and one for specialty chemicals trading.

Brenntag rejects this and wants to further develop both divisions under one roof. But ISS also argues in the report that has now been published that the company’s dual structure does not bring any advantages.
The Essen-based group calls on the shareholders not to follow the rejection of ISS. According to a statement by Brenntag, the former Lonza boss Ridinger has extensive industry experience in the entire chemical industry, which rival candidate Wild cannot show.

Election of the Primestone candidates would also mean that the supervisory board could not really act independently in the interests of all shareholders, Brenntag argued. The group receives support from the German Association for the Protection of Securities (DSW), which represents thousands of small shareholders.

Its chief executive Marc Tüngler has rejected Primestone’s demands for a split from Brenntag and does not support the election of its candidate for the supervisory board.

It is unclear how other important shareholders position themselves on this issue. Larger shareholders include asset manager Blackrock, US investor Capital Group and German asset manager Flossbach von Storch. The holding company of the Hamburg logistics company Klaus-Michael Kühne also holds a larger stake in Brenntag.

On June 16th there could be a showdown at the general meeting. Should the activist investor prevail, this should also stir up the management around CEO Christian Kohlpaintner.

More: German corporations are becoming the preferred target of activist shareholders

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