Activist investors in Brenntag SE plan to nominate dissident directors to the supervisory board of the German chemical distributor, escalating a campaign to break the company in two.
(Bloomberg) — Activist investors in Brenntag SE plan to nominate dissident directors to the supervisory board of the German chemical distributor, escalating a campaign to break the company in two.
The move by shareholder PrimeStone Capital, disclosed in a letter Tuesday seen by Bloomberg, follows meetings last month that failed to convince Brenntag Chief Executive Officer Christian Kohlpaintner to quickly split the specialty division from essential chemicals. PrimeStone and other activists want to separate the two operations to improve profit margins and lift the stock.
Last week, Brenntag said it will wait until later this year to consider a reorganization, ignoring pleas from PrimeStone and another investor, Engine Capital, to act with urgency. The company also said it won’t consider major board changes until 2024, despite PrimeStone’s threat to propose two of its own nominees.
Read: Germany’s Brenntag Brushes Off Activists, Risking Proxy Battle
The move by PrimeStone, owner of just more than 2% of Brenntag, sets up a showdown at the annual general meeting in mid-June, with the London-based fund lobbying to bring other shareholders over to its side. PrimeStone will need to file its formal board-seat proposal by about two weeks ahead of the June 15 meeting.
The Essen-based company told major shareholders last week that “it doesn’t serve the company’s best interest to significantly reshuffle the supervisory board” while the company is considering strategic decisions.
Years of underperformance show the board needs to be strengthened, and the decision to wait until 2024 shows “there is no sense of urgency” to address its weaknesses, PrimeStone said in its most recent letter, addressed to Brenntag’s board.
“Both of these things need to change quickly if they are to change at all,” the London-baseed fund said. “We look forward to making these points clear to our fellow shareholders over the coming weeks.”
PrimeStone also said it could still up the stakes further, by calling for a shareholder vote directly on the question of a breakup. While such a measure would need backing from investors representing 75% of the stock present at the meeting, significant support would put pressure on management to act.
“The management board could be instructed to prepare without undue delay the separation of the two divisions of Brenntag by means of either a split-up or a spin-off at the next AGM,” PrimeStone said.
Shares of Brenntag have advanced 18% this year, bringing its market value to €10.9 billion ($11.9 billion). By comparisonm, Germany’s DAX Index is up 13%.
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