AECI CEO Mark Dytor says having one owner will benefit Crest. Picture: MARTIN RHODES
AECI CEO Mark Dytor says having one owner will benefit Crest. Picture: MARTIN RHODES

Chemicals group AECI has sold its 50% shareholding in chemicals distributor Crest Chemicals to joint venture partner and global chemical distribution firm Brenntag for R390m, the company said on Monday.

Crest, a distributor and reseller of chemicals to a broad range of industries including industrial, paint and coatings, food, mining and water, has been a joint venture between the two companies since 2001. 

“Crest has been a valuable asset in our group’s portfolio for several years. However, both shareholders have now agreed that the business will be better served under a single owner,” AECI CEO Mark Dytor said.

Competition Commission

AECI said the completion of the transaction was subject to certain conditions, including approval by SA’s Competition Commission. It said the deal was expected to be completed before the end of 2019.

AECI executive Dean Murray on Monday said selling the stake was an appropriate move because of Brenntag’s presence in SA. He said AECI and Brenntag had been in discussions to end the joint venture since 2014.

“We thought it would be best if Crest had one owner. The company has never been fully integrated into AECI and it was never fully integrated at Brenntag,” Murray said.

He said the sale of the stake was unrelated to the poor market conditions that have hit AECI’s chemicals business. In the six months ended June 30, it reported flat sales volumes, while profit from operations was down 2.9%.

Speaking at the release of the company’s interim results last Wednesday, Dytor said the chemicals business had taken strain from the stunted growth in SA’s manufacturing sector, with its customers under severe pressure.

AECI’s chemicals business supplies raw materials for use across a range of customers in manufacturing, infrastructure and general industrial sectors in SA and other Southern African countries. In the six months, the chemicals business’s volumes were restricted due to lower demand as customers scaled back or closed operations.

“This transaction had nothing to do with the state of the chemicals business. In fact, at some stage AECI also wanted to buy the 50% stake in Crest. We made an offer to buy out Brenntag but they were adamant that they wanted to hold on to their 50%,” Murray said.

He said he did not expect the deal to encounter competition law hurdles. Besides Brenntag, other major players in the chemicals distribution market in SA include Omnia’s Protea Chemicals and chemical and food ingredients distributor IMCD.

 “Chemical distribution is not a big market in SA. I do not expect competition issues,” he said.

njobenis@businesslive.co.za