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Chris Hughes

US Takeovers Are Hot Stuff – Provided Buyers Can Afford Them

Even with private equity sidelined, investors are wary of deals that involve taking on additional leverage.

The art of the deal.

The art of the deal.

Photographer: James W. Welgos/Getty Images

This should be the time when forward-thinking bosses can launch a takeover without having to fight a counterbid from a private equity firm, and hopefully end up paying a sensible price. And yet the shareholders of corporate buyers are punishing acquisitive ambition. What looks like an open goal is actually a trap.

Take Brenntag SE. Shares of the German chemicals distributor have slid more than 10% since Bloomberg News revealed it was mulling the purchase of US peer Univar Solutions Inc. A deal would enhance Brenntag’s US position at a time when European customers are grappling with a fragile economy and insecure energy supplies. The cost savings, estimated by Barclays Plc analysts at 400 million euros ($412 million) annually, appear to justify paying a typical takeover premium on Univar’s undisturbed market value of $5.1 billion.