Univar will acquire its US peer Nexeo Solutions, a firm which distributes chemicals and ingredients, in a deal worth $2 billion.
Nexeo was bought for around $1.6 billion in 2016 by a company run by Wilbur Ross, the current US secretary of commerce.
The company offers functional products for customers in the bakery, confectionery, beverage, dairy and meat sectors. It also supplies materials for plastic packaging.
Univar said it has hired an external advisor to evaluate strategic alternatives for Nexeo’s plastics business, “which may include a potential divestiture”. The unit will represent less than 10% of the combined companies’ earnings.
David Jukes, Univar CEO, said: “This transformational combination is designed to create the premier global chemical and ingredients distributor, with exciting opportunities for our customers, suppliers, employees and investors.
“Together, we will drive growth and shareholder value with the largest North American sales force in chemical and ingredients distribution, the broadest product offering, and most efficient supply chain network in the industry.
“We expect the transaction to be accretive to earnings and cash flow beginning in the first full year post-closing and to generate $100 million of annual run rate cost savings by the third year following close and reduce annual capital expenditures by $15 million immediately.”
He added: “By combining the best capabilities, talent, and resources from our two companies we will be even better equipped to deliver superior service and expanded value to our customers and supplier partners.
“We expect to leverage Univar’s leading e-commerce and digital capabilities across Nexeo’s financial systems and centralised ERP platform to accelerate the digital transformation already underway at Univar and reduce costs, while enhancing the ease of doing business.
“Our shared commitment to safety and innovation and our common organisation structures provide a strong foundation for a smooth and successful integration.”
Nexeo CEO David Bradley added: “We share Univar’s confidence in the future of our combined enterprise, given the strong strategic alignment across our business models, go-to-market strategies, superior product offerings, and digital capabilities. This combination represents a logical and compelling step forward, consistent with our focus on accelerating growth for the benefit of our customers, employees and suppliers.
“We are especially pleased that Nexeo’s employees are highly valued by Univar, and that our shareholders will be able to participate in the company’s future success through ongoing equity ownership.”
It is expected the transaction will close in the first half of 2019.
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