IPO Report: Univar (UNVR)

Francis Gaskins |

Univar (UNVR) is a leading global chemical distributor and provider of innovative value-added services. The company is based in Downers Grove, IL. 

Six other companies are scheduled for the week of June 15. The full IPO calendar is available at IPO Premium.

SEC Documents

Manager, Joint-managers: Deutsche Bank Securities, Goldman Sachs, BofA Merrill Lynch
Co-managers: Barclays, Credit Suisse, J.P. Morgan, Jefferies, Morgan Stanley, Citigroup, HSBC, Moeli, Wells Fargo Securities, Lazard, SunTrust Robinson Humphrey, William Blair

End of lockup (180 days): Tuesday, December 15, 2015
End of 40-day quiet period: Wednesday, July 29, 2015

UNVR scheduled a $420 million IPO with a market capitalization of $353 million at a price range midpoint of $21 for Thursday, June 18, 2015 on NYSE.

Summary

UNVR is a leading global chemical distributor and provider of innovative value-added services.

For the fiscal year ended December 31, 2014, UNVR held the #1 market position in North America and the #2 market position in Europe.

Valuation

Glossary

Accumulated deficit (mm)

.

.

-$1,331

     

Per share dilution

.

.

-$31.10

     
             

Valuation Ratios

Mrkt Cap (mm)

Price /Sls

Price /Erngs

Price /BkVlue

Price /TanBV

% offered in IPO

Univar (UNVR)

$2,898

0.2

36.2

3.3

-2.1

14%

annualizing Q1

         
             

Conclusion

Neutral

Highly leveraged private equity sponsored co

Q1 rev declined

Low gross profit of 20%

Interest exp 77% of operating earnings

Steady stream of losses until Q1 '15

Q1 annualized P/E of 36

Can that profit continue?

.2 times sales

No patents

Business

UNVR is a leading global chemical distributor and provider of innovative value-added services.

For the fiscal year ended December 31, 2014, UNVR held the #1 market position in North America and the #2 market position in Europe.

UNVR sources chemicals from over 8,000 producers worldwide and provide a comprehensive array of products and services to over 110,000 customer locations in over 150 countries.

UNVR’s scale and broad geographic reach, combined with its deep product knowledge and end market expertise and its differentiated value-added services, provide it with a distinct competitive advantage and enables it to offer customers a “one-stop shop” for their chemical needs.

As a result, UNVR believes it is strategically positioned for growth and to increase its market share.

The global chemical distribution industry is large, fragmented and growing, as producers and customers increasingly realize the benefits of outsourcing.

 Chemical producers rely on UNVR to reduce complexity and costs within their organizations by outsourcing not only the distribution of their products but also many of the services that their customers require, as well as to improve their market access and geographic reach.

Customers who purchase products and services from UNVR benefit from a lower total cost of ownership, as they are able to simplify the chemical sourcing process and outsource a variety of functions such as packaging, inventory management, mixing, blending and formulating.

New CEO

Since hiring its President and CEO, Erik Fyrwald, in May 2012, UNVR has significantly enhanced its management team and have implemented a series of transformational initiatives to drive growth and operating performance. These initiatives include:

focusing increased efforts on strengthening its market, technical and product expertise in attractive, high-growth industry sectors;

increasing and enhancing its value-added services, such as specialty product blending, automated tank monitoring and refill of less than truckload quantities, chemical waste management and digitally-enabled marketing and sales;

undertaking a series of measures to drive operational excellence, such as enhancing its supply chain and logistics expertise, enhancing its global sourcing capabilities, reducing procurement costs, streamlining back-office functions and improving its working capital efficiency;

pursuing commercial excellence programs, including significantly increasing its global sales force, establishing a performance driven sales culture and developing its proprietary, analytics-based mobile sales force tools; and

continuing to improve upon its distribution industry leadership in safety performance, which serves as a differentiating factor for both producers and its customers.

As a result of these initiatives, UNVR believes it is well-positioned to continue to capture market share and improve its margins. In the twelve months ended March 31, 2015, UNVR generated $10.2 billion in net sales and $641.8 million in Adjusted EBITDA.

Intellectual Property

UNVR currently owns trademark registrations or pending applications in approximately 67 countries for the Univar name and in approximately 41 countries for the Univar hexagon logo.

Each of the issued registrations is current and valid for the maximum available statutory duration and can be renewed prior to expiration of the relevant statutory period. UNVR renews the registrations as they become due for both of these marks.

UNVR claims common law rights in the mark “Univar” and other Univar-owned trademarks in those jurisdictions that recognize trademark rights based on use without registration. Additionally, UNVR currently owns registrations and pending applications in the United States and various jurisdictions for numerous other trademarks that identify Univar as the source of products and services, including “ChemPoint.com”, “ChemCare”, and “PESTWEB”.

Competition

North America

The independent chemical distribution market in North America is fragmented with just under 50% of the market serviced by the top five companies and more than half the market serviced by companies that have a share of less than 2% each. UNVR’s principal competitors in North America include Brenntag, Helm America, Hydrite Chemical, Prinova and Nexeo Solutions—formerly Ashland Distribution. UNVR also competes with a number of smaller companies in certain niche markets.

EMEA

The independent chemical distribution market in Europe historically has been highly fragmented with most distributors operating on a regional basis and just over a quarter of the market serviced by the top five companies. Consolidation among chemical distributors has increased, mirroring developments within the chemical sector as a whole. As consolidation accelerates amongst chemical producers and customers alike, they are increasingly looking to do business with fewer distributors that handle a range of key products across key geographic regions.

Brenntag is UNVR’s leading competitor in Europe due to its strong market position in Germany, which is the largest European chemical distribution market. Other regional competitors in Europe include Azelis, Helm and IMCD. UNVR believes that it is the leading chemical distributor in the United Kingdom and Ireland.

In EMEA, UNVR believes that there are approximately 50 companies in the chemical distribution market with annual sales in excess of $100 million. UNVR believes that it ranks as the third largest in this market and that many of its competitors in this market have narrower product offerings and geographic reach than its company.

Rest of World

In Rest of World, the markets for chemical distribution are much more fragmented and credible competitive information for smaller companies is not available. UNVR’s relative competitive position in the Rest of World markets is smaller than in North America or EMEA.

5% Shareholders Pre-IPO

CVC Capital Partners Advisory (U.S.), Inc. and related funds       52.2%

CD&R Univar Holdings, L.P. and related funds   40.5%                          

Dividends

No dividends are planned.

Use of Proceeds

UNVR expects to receive $389 million from its IPO and use it for the following:

(i) redeem, repurchase or otherwise acquire or retire $600.0 million of its outstanding 2017 Subordinated Notes and $50 million of its outstanding 2018 Subordinated Notes, (ii) pay related fees and expenses, (iii) pay the Equity Sponsors an aggregate fee of approximately $26 million to terminate the consulting agreements described below under “Certain Relationships and Related Party Transactions—Consulting Agreements” and (iv) to use the remaining proceeds, if any, for general corporate purposes.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Companies

Symbol Name Price Change % Volume
UNVR Univar Inc. 25.05 0.33 1.34 894,403

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