Brenntag Proposes 3-for-1 Stock Split Amid Chemical Growth

Brenntag AG (BNR), the largest distributor of chemicals, said it will propose a 3-for-1 stock split at the annual shareholder meeting as it expects earnings growth this year and an increasing stock price.

Adjusted operating profit will increase “moderately” this year, not including potential acquisitions, Chief Executive Officer Steven Holland said at a press conference today in Muelheim an der Ruhr, Germany, where the company is based. While profit could grow 6 percent to 9 percent annually, that might be a “tough range” in a year that the global economy is just starting to pick up, Chief Financial Officer Georg Mueller said.

Brenntag decided on the stock split because the shares have more than doubled since the initial public offering and now have one of the highest nominal values in the MDAX index of medium-sized German companies. Holland said the company will accelerate its acquisition rate this year, spending more cash on more targets, and will announce a purchase “very soon.”

“We expect the spend on acquisitions to be far in excess of what we spent in 2013,” Holland said. It wasn’t a change of policy that only 50 million euros ($70 million) were spent on purchases last year, just that a number of transactions were complex and rolled into 2014, he said.

Operating profit increased in January and February, Mueller said.

Brenntag, which distributes chemicals for Evonik Industries AG and supplies Bayer AG with sulfuric acid, rose as much as 2.5 percent to 134.15 euros and was trading up 1.4 percent at 132.75 euros as of 12:14 p.m. local time. The stock has risen 17 percent in the past 12 months, giving the company a market value of 6.8 billion euros.

Liquidity Boost

Brenntag expects the stock split to increase trading liquidity, which is one of the criteria looked at for a stock’s entry in the benchmark DAX index, Mueller said. In terms of the criteria for market value, the company is “already there,” he said, adding that while the stock split may help with entry into the DAX it’s not the key element.

While the chemical distributor typically aims to spend 200 million euros to 250 million euros on acquisitions a year, it would spend more if a strategic opportunity came along, Holland said today. Asia Pacific is set to grow this year after the company ramped up management resources and capacities, he said.

Adjusted earnings before interest, tax, depreciation, amortization and one-time items fell 0.9 percent to 181.3 million euros in the fourth quarter. Analysts had predicted 182.6 million euros, according to a Bloomberg survey. Sales dropped 1 percent to 2.32 billion euros, missing an analyst estimate of 2.42 billion euros.

To contact the reporter on this story: Sheenagh Matthews in Frankfurt at smatthews6@bloomberg.net

To contact the editors responsible for this story: Simon Thiel at sthiel1@bloomberg.net Andrew Noel, Tom Lavell

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