Univar Inc. (UNVR - Get Report) said after the market closed Monday that it will acquire Nexeo Solutions Inc. (NXEO) in a cash-and-stock deal valued at $2 billion, including Nexeo's debt and other obligations. At $11.56 per Nexeo share, the deal represents a 15% premium over Nexeo shares' close at $10.01 on Monday. Nexeo shares were up 15% in after-hours trade.
Nexeo, which distributes chemicals and plastics, was bought two years for about $1.6 billion by a company run by Wilbur Ross, the U.S. Secretary of Commerce.
In a news release Monday, Univar President and CEO David Jukes said, "This transformational combination is designed to create the premier global chemical and ingredients distributor, with exciting opportunities for our customers, suppliers, employees and investors. Together, we will drive growth and shareholder value with the largest North American sales force in chemical and ingredients distribution, the broadest product offering, and most efficient supply chain network in the industry. We expect the transaction to be accretive to earnings and cash flow beginning in the first full year post closing and to generate $100 million of annual run rate cost savings by the third year following close and reduce annual capital expenditures by $15 million immediately."
The terms call for each share of Nexeo stock outstanding to be converted into 0.305 shares of Univar common stock and $3.29 in cash, subject to adjustment at closing, representing a purchase price of $11.65 per share of Nexeo common stock, based on Univar's closing price on Sept. 14, 2018 of $27.40. The cash consideration is subject to a potential reduction of up to $0.41 per share, based on Univar's stock trading price prior to the completion of the acquisition.
The companies said the deal is expected to deliver $100 million, or approximately $0.43 per share (after tax), in annual run-rate cost savings by the third year following close, and immediately reduce ongoing annual capital expenditures by $15 million. It is expected to be accretive to Univar's Adjusted EPS beginning in the first full year following closing. Univar expects pro forma leverage ratio to be below 3.0x by the end of the first full year after closing, the company said.
The boards of both companies have approved the deal, which is expected to close in the first half of 2019, subject to shareholder and regulatory approval.