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Univar's $2B Buyout of Nexeo Gets U.S. Antitrust Clearance

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Univar Inc. has announced the expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, in connection with its earlier announced acquisition of global chemicals and plastics distributor, Nexeo Solutions, Inc. .   

The expiration of the waiting period is one of the conditions necessary for completion of this transaction. The deal, which now remains subject to other customary closing conditions including approval by other national regulatory authorities and shareholder clearance, is expected to close in first-quarter 2019. Key stockholders of Nexeo, First Pacific and TPG, have agreed to provide consent for the proposed deal.

Univar, in September 2018, agreed to buy Nexeo in a cash and stock deal valued at roughly $2 billion. Notably, the transaction includes the assumption of Nexeo’s debt and other obligations. Univar plans to finance the cash portion of the deal and refinance Nexeo’s existing debt with a combination of bank financing and available cash.

Per the deal, each share of Nexeo’s issued and outstanding stock will be converted into 0.305 shares of Univar common stock and $3.29 in cash, which is subject to adjustment at closing. This represents a purchase price of $11.65 on the basis of Univar’s close price of $27.40 as of Sep 14, 2018. Notably, the cash consideration is subject to a potential reduction of up to 41 cents on the basis of Univar’s stock price prior to the completion of the acquisition.

The combination is expected to drive growth and boost shareholders’ value with the largest sales force in North America along with extended product offering and most efficient supply chain network in the industry.

According to Univar, the transaction is expected to be accretive to cash flow and earnings starting in the first full year after the closure of the deal. It is expected to deliver $100 million or 43 cents per share (after-tax) of annual run rate cost savings by the third year following closure and reduce annual capital expenditures by $15 million immediately.

Shares of Univar have lost around 19.2% in the past year, underperforming the industry’s decline of 17.2%.


 

Univar, in its third-quarter earnings call, stated that it expects foreign exchange headwinds and challenges in Canada to dampen growth in the fourth quarter. The company expects fourth-quarter adjusted EBITDA to be flat compared with year-ago quarter’s results. The guidance also takes into account demand softness in certain markets.

For 2018, Univar now anticipates adjusted EBITDA growth of high single-digit while adjusted earnings per share are projected at roughly $1.60 per share, reflecting an increase of 15.1% from the prior year.

Univar Inc. Price and Consensus

 

Univar Inc. Price and Consensus

Univar Inc. price-consensus-chart | Univar Inc. Quote

Zacks Rank & Stocks to Consider

Univar currently carries a Zacks Rank #4 (Sell).

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Mosaic has expected long-term earnings growth rate of 7%. Its shares have surged 59% in the past year.

Methanex has expected long-term earnings growth rate of 15%. Its shares have gained 21% in the past year.

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