Azelis confirms plans for IPO

The Europe-headquartered distributor has absorbed the recent KODA acquisition and is preparing to go public as early as 2017-2019, once the market and its owners are ready.

Distributor Azelis may go through an initial public offering (IPO) and stock market floatation as early as 2017-19, according to its chief executive officer Hans Joachim Muller. The company, which grew significantly through the acquisition of US-based KODA Distribution Group in December 2015, should be ready for the strategic move by the end of 2016, the CEO says.

“KODA is an important milestone towards our IPO and we’re working towards being ready by the end of 2016. Then the IPO
should take place between 2017-19 depending on three things: performance of the business; strategy of our owners, Apax; and the financial markets have to be ready.”

Private equity group Apax acquired Azelis from 3i in 2015. Muller said that a lot of banks have expressed an interest in discussing the IPO plans, but for now the group is focussed on running and growing the business. He added: “We can influence the performance of our business, but the other two aspects are for the owners and the market. It will not be as late as 2022/23 and could be as early as 2017. From an accounting and reporting perspective we will then be ready.”

The KODA deal was signed on 17 October 2015 and closed on 17 December. Muller says that the due diligence his team did when analysing the deal has turned out to be correct. A danger when one distributor acquires another is the chance that competing suppliers of the same product come into the portfolio. With this deal, though, there are synergies rather than dis-synergies between suppliers, he claims.

The integration was completed at the end of June from a business point of view.Although ERP systems are not yet identical across the merged group, communication about the monthly financial accounts happens very quickly, he says. Individual countries operate independently. For annual budgets, national operating units make a proposition in line with company strategy during the summer and the third quarter and are finalised by early October.

M&A strategy
Azelis is looking at several mergers & acquisitions (M&A) projects and Muller hopes some may come to fruition by the end of the year. M&A is used to strengthen existing areas but not to enter completely new ones. Geographic focus is Europe and the Americas. “We’re not excluding a deal in Asia, but our focus is driven by our commitment to our principals that we’re completely compliant.”

Muller says investors are wary of expansion by M&A in Asia because of the high level of volatility there. “What are the risks in China? How stable is it? We like Japan from a business point of view but what about its age profile as it relates to how much people consume? How long can Japan continue with their monetary policy?”

Despite the challenges, Azelis is growing strongly in Asia with a focus on organic expansion. So far in 2016 Asia growth is more than 20% higher than the same period in 2015, fuelled by an expanding network of technical services laboratories. There are eight in Asia and a coatings lab is planned to open in India during 2016. He says Azelis has got Asia covered with its existing business, adding that it is important to be there because of growth potential when you consider that most of its population is comparatively young.

We can influence the performance of our business but the other two aspects are for the owners and the market.
Hans Joachim Muller, CEO, Azelis

In August 2016 Laurent Nataf, Europe chief operating officer, will transfer to become CEO of Asia to ensure enough attention is given to building the business there. He will be succeeded as chief operating officer EMEA by Anna Bertona. Muller expects to see some organic revenue and profitability growth in 2016. But it is difficult to grow organically when commodity prices are falling as this impacts revenues and profits.

Although primarily a specialty distributor, around 15-20% of the portfolio is commodities, enabling Azelis to offer a comprehensive product portfolio for each value chain it serves. “We’ll see quite an increase in profitability in EMEA and the Americas and very much so in Asia which is the strongest growth region for us.”

Africa expansion
Organic expansion is continuing into new geographies. On 1 February an office opened in New Zealand which will be earnings-accretive this year.In 2015 Azelis took its first step into Africa, opening an office in Morocco. It expects to open one in Ivory Coast in September, and there are plans for others in Ghana, Nigeria and Ethiopia this year.

He points out that Ethiopia has a population of 98.6m and has grown at over 10%/year for the past 11 years. “A lot of what we’ve seen in southeast Asia over the last 20 years we will see in Africa eventually. The Chinese did a lot of infrastructure investment there and it is working well; being an early entrant is an advantage.”

Although in Europe and the US the population is aging, immigration is helping a great deal to boost the numbers of young consumers, says Muller. In Germany, for example, 25% of the young people were not born in Germany. In the US, 1%/year GDP growth is caused by immigration.

Written by: Will Beacham, Barcelona
Article published in July 2016 issue of ICIS Chemical Business. Read the full article