Dusseldorf Shortly before the election of Dax Group Brenntag’s supervisory board, German funds backed the company. Investment firms Union, Deka and DWS each told Handelsblatt they would not vote for activist investor Primestone’s candidate at Thursday’s shareholder meeting.
Primestone wants to force the Essen-based world’s largest chemicals trader to break up quickly. They are trying to increase the pressure with a new supervisory board. The Brits put forward two candidates of their own, each of whom will compete against Brenntag’s proposed controller.
Activist investors think he has a good chance because influential U.S. voting rights advisers back him. The election’s signal has implications beyond Brenntag: it’s about how hedge funds fare in German companies with strategic needs.
As the big three German funds position themselves, they are increasingly distanced from Dax Group’s British investors. Brenntag majority shareholder Kühne Holding from Switzerland and German asset manager Flossbach von Storch want to vote for the company’s nominee, as does DSW, the German association for the protection of securities ownership.
U.S. shareholder advisers ISS and Glass Lewis recommended U.S. and U.K. funds to vote for Primestone’s nominee. In Germany, there has never been a case in which a voting rights adviser opposed all new supervisory board members proposed by the company.
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U.S. hedge fund Engine Capital is also backing Britain. It is unclear how other larger Brenntag shareholders will fare. Large U.S. investment firms Wellington and The Capital Group declined to comment to Handelsblatt.
Several US pension funds, some from Florida, have said they will follow the ISS and Glass Lewis recommendations. Traditionally, this has tended to be done by smaller funds that are not prepared to conduct their own analysis of the companies they invest in globally. Anglo-Saxon investors hold 60% of Brenntag.
“Brenntag is not primarily about the supervisory board members as individuals, but about whether the group should be completely dismantled,” said DSW CEO Marc Tüngler. Bulk chemicals business spin-off. Activist investors expect value addition through announcements and quick implementation. In his view, management has not addressed specialty chemical performance issues aggressively enough.
Brenntag is not opposed to a structural reorganization in the medium term. According to company circles, several options can be considered for this purpose. However, the group has to prepare in detail step by step for this. The course is supported by German shareholders.
Deka Investment ESG analyst Linus Vogel said: “We currently consider it inappropriate to upgrade the elections for two supervisory board positions at the upcoming general meeting.” You are willing to accompany further transformation paths in exchange for management and finding a common solution .
“That doesn’t fundamentally rule out the possibility of breaking up the company at a later date,” Vogel explained. Flossbach von Storch also sees no need to rush. In terms of adding value, management has to do something, but “cannot do it with a crowbar,” Brenntag shareholders wrote.
Thursday’s virtual shareholder meeting will be chaired by acting Brenntag supervisory board chairman Doreen Nowotne, who has announced her retirement. In the afternoon, shareholders voted on the two vacant positions on the Supervisory Board. Brenntag supervisory board member Richard Ridinger faces off against Primestone candidate Geoff Wild. Both have extensive experience in the chemical industry.
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Ridinger served as CEO of Swiss fine chemicals manufacturer Lonza from 2012 to 2019 and was previously involved in the spin-off of Henkel’s chemicals business into Cognis GmbH. Primestone candidate Wild is head of Berlin-based specialty chemicals company Atotech until August 2022, after previously managing electronic chemicals maker AZ Electronic Materials.
Thursday’s annual general meeting will decide the future of the supervisory board.
(Photo: imago/Hans Blossey)
Two women are applying for the second vacant position on the supervisory board: Brenntag recommends Sujatha Chandrasekaran, who has served, among other roles, as chief digital officer at US cosmetics maker Kimberly Clarke. Primestone nominated Joanna Dziubak, who previously worked at Goldman Sachs investment bank.
If the Brenntag candidate wins, the procedure is clear: At its organizational meeting, the new supervisory board will elect Richard Ridinger as the new chief financial officer, a position he wants. It is unclear who would become the new chairman of the supervisory board if the two Primestone candidates win. Brenntag’s supervisory body has only six members, as there are no employee representatives.
Shareholders’ General Meeting Procedural Disputes
In both cases, activist investors can be expected to continue to put pressure on Brenntag. This is the assumption of company insiders. The two sides have been engaging in a partially public debate through letters, statements and talks for months. Thursday’s AGM is now a preliminary high.
Before the general meeting of shareholders, the dispute is also reflected in the procedure of the virtual meeting. Primestone accused the group of making it technically harder for shareholders to vote for its counter-proposal. “We are aware that shareholders representing a significant part of Brenntag Capital are currently unable to vote on the counter motion,” said a letter to the current supervisory board.
Bruntag denies the allegations. The company “does its best to facilitate and simplify the voting process at the AGM”. Brenntag has complied with all legal obligations and provided “full assistance” to shareholders.
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