(Bloomberg) — Brenntag SE fell sharply on Monday after the Germany chemical distributor confirmed a Bloomberg News report that it’s exploring its biggest-ever acquisition.

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    Shares in the Essen-based company dropped as much as 11%, following the news that it’s in preliminary discussions to buy US rival Univar Solutions Inc. The stock closed down 8.9% in Frankfurt, giving it a market value of €9.6 billion ($9.9 billion).

    Univar’s shares jumped in New York trading as much as 8.3%, the most in more than a year. The shares were up 3.2% to $31.98 at 3:32 p.m., giving it a market value of $5.2 billion and extending its gains for the year to almost 13%.

    Bloomberg News reported the deliberations late on Friday. A tie-up would rank as a top three transaction in the chemical industry this year and mark a late bright spot for big cross-border dealmaking.

    While Brenntag is a serial acquirer of smaller assets, a Univar takeover would be its largest purchase by far and a bold move for Chief Executive Officer Christian Kohlpaintner. The German company unveiled a new growth plan this month to “shape the future of its industry” including organic re-investments and “value creating M&A activities.”

    ‘Unrivaled” Position

    “Acquiring Univar would give Brenntag an unrivaled market position in the US, and generate important operational synergies, but it would not accelerate a mix shift towards higher margin, higher growth specialty chemicals,” Citigroup Inc. analysts wrote in a note.

    Brenntag is the global market leader in chemical and ingredients distribution with over 17,000 employees in 78 companies, according to its website. Univar, meanwhile, boasts one of the industry’s largest private transportation fleets as well as a sales force and logistics team that helps connect chemical makers and buyers across sectors.

    Illinois-based Univar is also no stranger to dealmaking. It merged with rival Nexeo Solutions Inc. in 2018 and then sold its plastics business in 2019. A combination with Brenntag would create an opportunity to boost growth and cut costs, but could also face tough antitrust reviews as national governments more closely scrutinize sector tie-ups.

    ‘Logical Step’

    “We believe such a transaction would be a logical step, creating a leading chemical distributor with significant competitive advantages over regional competitors in a period of accelerating industry transformation,” analysts at Jefferies Financial Group Inc. wrote in a note.

    While saying a deal “makes a lot of sense,” Baader Helvea analyst Markus Mayer advised investors to be cautious because it might trigger an equity raise and the details aren’t known yet.

    Warburg analyst Christian Cohrs sees a high probability of regional overlaps that will have to be addressed. “Integration will be anything but easy given the magnitude of this deal,” he wrote.

    –With assistance from Eyk Henning, Dinesh Nair, Sam Unsted and Alexandra Muller.

    (Updates with Univar share gain in third paragraph.)

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