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Activists clash with leading German chemical group over on-board vote


Activist investors have clashed with Germany’s Brenntag over the timing of the chemical group’s annual shareholder meeting, escalating an already bitter battle over strategy and governance.

Shareholders of Essen-based Brenntag are expected to elect two new commissioners to replace those whose terms expire this year, including chairman Doreen Nowotne, at the annual meeting on June 15.

Activist investors PrimeStone Capital and Engine Capital, which together own 3 percent of Brenntag shares, have openly rejected the company’s proposed candidates, including Richard Ridinger, who has served on the board since 2020 and is Nowotne’s designated successor as chairman.

Instead, they have put forward Geoff Wild, a chemical industry veteran, and former Goldman Sachs banker Joanna Dziubak as their own outside candidates. In a rare move, both of the leading proxy advisors ISS and Glass Lewis endorsed the activists’ candidates and advised shareholders not to support the company-backed candidates.

The governance battle comes on top of activists’ demands to divest what they see as Brenntag’s non-nuclear operations.

The Essen-based group, which reported sales of €19.4 billion last year, is the world’s largest distributor of chemicals, with its main division generating 55 percent of operating profit. A separate, smaller unit distributes specialty chemicals such as acetone and phosphoric acid.

Richard Ridinger has been on the board of Brenntag since 2020 © Mayk Azzato

Both PrimeStone and Engine have called for a separation of those activities, arguing that they generated little or no synergies and increased the complexity of the business structure.

“Brenntag has consistently underperformed for more than a decade,” PrimeStone argued in a recent presentation, adding that the company had “low growth, poor cost control, questionable M&A, lack of direction.” The investor estimated that Brenntag’s total shareholder return over the past five years was 40 percent lower than its peers, adding that this wiped out €2.5 billion “in the last two years alone”.

Chief executive Christian Kohlpaintner, in charge since 2020, has launched a restructuring program separating chemical production and distribution. People familiar with his thoughts say he is open to a full split in the future, but was concerned that a hasty split could generate two stunted entities.

Brenntag has a market capitalization of €12 billion. Its shares are up 3.3 percent over the past year, compared to a 10 percent increase in the broader Dax.

ISS, in its proxy report, supported the claims, calling Brenntag’s “a story of lost opportunity and potential”, in part due to “management actions that directly destroyed shareholder value”.

As a compromise on the composition of its board of directors, Engine Capital proposed on Monday to expand its supervisory board by two members to a total of eight to accommodate both the company’s candidates and those supported by its activists.

Under German law, such a motion requires a change to the agenda of the annual meeting, which can only be passed if it is adjourned for a few weeks.

“Brenntag remains reluctant to participate and appears intent on extending a costly and unnecessary election contest to preserve the status quo,” Engine Capital said in a statement Monday.

Primestone’s managing partner, Franck Falezan, said he had nothing personal against the company-backed board members, noting that “a more diverse and fresh board is needed”. He added that Brenntag had the smallest supervisory board of any German blue-chip company in the Dax 40 index.

However, he accused the current board of being “totally out of touch with the reality of the company’s performance” and said it had made “very big mistakes” regarding a lack of cost containment and an ill-fated attempt to overthrow US rival Univar. Take over solutions.

Brenntag said it “strongly disagrees” with the recommendations from ISS and Glass Lewis, reiterating his advice to shareholders to vote in favor of management. Brenntag told the Financial Times it would not postpone its annual meeting, pointing to the legal requirement for it to be held six months after the end of the fiscal year.

Any delay would also delay dividend payments to shareholders and would not be in their best interests, the company said.

Flossbach von Storch, a large German asset manager and one of Brenntag’s top shareholders with a stake of more than 5 percent, said it supported the company-backed candidates, adding that a postponement of the meeting would waste time.

This story has been edited to correct the description of Brenntag’s specialty chemicals business

Merry C. Vega is a highly respected and accomplished news author. She began her career as a journalist, covering local news for a small-town newspaper. She quickly gained a reputation for her thorough reporting and ability to uncover the truth.

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