Activist investor Engine Capital took a 1% stake in Germany’s Brenntag SE and urged the chemicals distributor to spin off its specialties unit on Tuesday, arguing that they would be more valuable as separate entities.
New York-based Engine Capital made its demands in a letter to Brenntag’s management a month after the German company ended talks with smaller U.S. rival Univar Solutions on a possible takeover. Engine Capital is also a shareholder in Univar.
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“Brenntag Specialties is not achieving its full potential… management acknowledges this underperformance and has taken initial steps to fix these issues, namely by beginning a separation of certain aspects of Brenntag Specialties from Brenntag Essentials,” Engine Capital’s Arnaud Ajdler and Brad Favreau said in a letter, a copy of which was reviewed by Reuters.
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As a standalone entity, Brenntag Specialties can maximize its potential and close the gap with its competitors, Engine Capital pointed out, adding that the specialties unit will lose market share the longer it delays the spin-off.
If Brenntag followed the recommendations, it would trade at about 140 euros per share by the end of 2024 – about double its current share price, the activist investor added.
Brenntag declined to comment to a Reuters query. Bloomberg News first reported the move.
Engine Capital joins PrimeStone, another activist investor, in calling for Brenntag to break up into two separate companies.
Further, Engine Capital sought a share buyback program and to add a shareholder representative to Brenntag’s supervisory board. (Reporting by Akanksha Khsuhi, Akriti Sharma and Urvi Dugar in Bengaluru; Editing by Rashmi Aich and Dhanya Ann Thoppil)