Chemical Distribution Dynamics May Drive Consolidation

09 September 2016 16:53 Source:ICIS News


BOSTON (ICIS)--Shifting dynamics in chemical distribution will drive further consolidation in the sector, a senior executive from Brenntag said on Friday.

“It is still a highly fragmented market with huge opportunities for consolidation,” said Robert Moser, senior vice president of global accounts and director of government affairs at Brenntag, the world’s leading chemical distributor.

Moser spoke at the 9th ICIS World Chemical Purchasing Conference in Boston, Massachusetts.

The top 10% of the over 240 chemical distributors listed in the ICIS Top 100 Chemical Distributors ranking represent about $52bn in annual sales, or less than one-third of the global market, he noted.

The emergence of large chemical distributors as publicly traded companies is impacting market behaviour, said Moser.

From zero publicly traded companies five years ago, today Brenntag, Univar, Nexeo Solutions and IMCD are all public, he pointed out.

“One impact of this is that companies are making acquisitions in less volatile markets to broaden their portfolios and take some of the risk out,” said Moser.

On 9 September, Brenntag made its third acquisition of a lubricants distributor in the past year, buying US-based Mayes County Petroleum Products.

The second largest global distributor, Univar, has made a number of acquisitions in waste and environmental services over the past year.

Overall barriers to entry in chemical distribution are increasing with significant demands from regulatory authorities in areas such as new build installations. This will increase capital spending over time and drive consolidation, said Moser.

“Market demands will force further consolidation and specialised services. You can be big or a niche specialised distributor, but it’s challenging to be mid-sized,” he said.

Another advantage of size is the ability to influence suppliers. “Larger distributors can move more volumes so they have leverage with multiple suppliers,” said Moser.

“Many distributors are larger than their producer partners. Thus, pricing management and control is less producer directed and more market relevant,” he added.

Allnex and Nuplex are Now Officially Combined

 

Brussels, Belgium / September 14 2016 – Allnex, a leading international supplier of resins backed by investor Advent International, today announced that Nuplex Industries, a global manufacturer of resins, and Allnex have now been brought together to form one company. The group, present on four continents and serving customers in over 100 countries, becomes the leading industrial coating resins company globally.


The company will operate under the name of Allnex and is today launching a new logo that is a symbolic representation of the combined strengths of Nuplex and Allnex. It will now draw on the expertise and scope of both Nuplex and Allnex, two companies that both have a history of commitment to innovation and engagement with customers, as well as complementary geographical footprints. They also share similar corporate values and a global outlook.


Miguel Mantas, the new CEO of Allnex, commented, ‘I am delighted that this business combination has taken place. With our comprehensive, state-of-the-art technology portfolio, our ability to provide clients with the right chemistry for their products is even more extensive than before. I am also looking forward to moving our corporate headquarters to Frankfurt. The decision to choose Frankfurt for the future company’s headquarters was taken with the intention of establishing a new location, symbolizing a fresh start for the company. Frankfurt offers excellent flight, rail and car connections. The city is located in the heart of Europe and Germany, the largest European economy and a key market for the company and for the coatings industry in general.’


The Chairman of the Allnex Advisory Committee, Rich Alexander, said, ‘I am particularly enthusiastic about the modernized branding and new logo of our company. It unites the visual identities of both companies and embodies our commitment to taking the best elements from both Allnex and Nuplex.’


Ron Ayles, a Managing Partner at Advent International and head of the firm’s global chemicals practice, said, ‘the combined company will be a strong global leader in industrial coating resins, with over 30 manufacturing sites and about two dozen research and technology support facilities. This puts us in an excellent position to consolidate current markets and develop new ones.’

 

About Allnex
Allnex, formerly Cytec Industries' Coating Resins business and acquired by Advent in 2013, is a leading global producer of coating resins and additives for architectural, industrial, protective, automotive and special purpose coatings and inks. Allnex is recognized as a specialty chemicals pioneer and offers an extensive range of products including innovative liquid resins and additives, radiation cured and powder coating resins & additives and cross linkers for use on wood, metal, plastic, and other surfaces.

 

About Advent International
Founded in 1984, Advent International is one of the largest and most experienced global private equity firms and a leading investor in the global Chemicals industry. Advent's investment philosophy is centred on supporting leading management teams and providing resources for further growth in order to execute on a mutually developed strategy and investment case. To date, Advent has raised cumulative capital of US$53 billion and has executed over 310 transactions including over 30 investments in the Chemicals industry. Advent has a strong track record of making significant and successful investments, with recent chemicals transactions including Allnex (formerly Cytec Industries' Coating Resins business), Oxea, Maxam, Viakem and Grupo Transmerquim. Advent also has extensive experience in conducting Public-to-Private transactions, with recent examples including Douglas, Mediq and Unit 4.

 

Specialty Chemical Distribution in North America Market Update

 

This document was published by the Boston Consulting Group in March 2016 and written by Andrew Taylor, Udo Jung, Adam Rothman, and Christopher Moxon.

 

Click the button to download the entire report. 

At A Glance

The specialty chemical market in North America is growing faster than the overall chemical market in the region, and third-party distribution is growing faster still. These disparities are likely to widen over the next decade. Suppliers and distributors can take specific measures to capitalize on this shift.

Three Strategic Priorities for Suppliers
Suppliers should define a business case that is aligned with their go-to-market sales strategies, systematically choose distributors, and actively govern their relationships with distributors over time. 


Four Strategic Priorities for Distributors

Distributors should invest in technical capabilities that can help them offer value-added services, improve the effectiveness of their sales force, strategically acquire companies, and manage their brands through waves of consolidation.


Distributors are Making Transatlantic Deals

Some distributors are now merging to create larger companies with established businesses in both the US and Europe. The growth of these companies with likely outpace industry averages. 

 


About The Boston Consulting Group
The Boston Consulting Group (BCG) is a global lead management consulting firm and the world's leading advisor on business strategy. We partner with clients from the private, public, and not-for-profit sectors in all regions to identify their highest-value opportunities, address their most critical challenges, and transform their enterprises. Our customized approach combines deep insight into the dynamics of companies and markets with close collaboration at all levels of the client organization. This ensures that our clients achieve sustainable competitive advantage, build more capable organizations, and secure lasting results. Founded in 1963, BCG is a private company with 85 offices in 48 countries.  

 

President Obama Signs TSCA Reform Legislation

From NACD ChemBytes:

(June 22, 2016)  President Obama signed H.R. 2576, the Frank R. Lautenberg Chemical Safety for the 21st Century Act that reforms the 40-year-old Toxic Substances Control Act (TSCA). The reform bill, which overhauls our nation's chemical management system, was passed earlier this year by both the U.S. House of Representatives and the U.S. Senate with overwhelmingly bipartisan support. NACD will be providing a short summary and transition document for members soon to help them prepare for the near term implementation items. The association thanks all those involved over the years in making this important legislative victory possible.

 

Video courtesy of C-SPAN