Univar Corporation

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Univar Corporation

6100 Carillon Point
Kirkland, Washington 98033
U.S.A.
(206) 889-3400
Fax:(206) 889-4100

Public Company
Incorporated: 1966 as VWR United Company
Employees: 3,325
Sales: $1.80 billion
Stock Exchanges: New York Pacific
SICs: 5169 Chemicals & Allied Products Nee; 5191 Farm Supplies; 8741 Management Services

Univar Corporation is a leading, international distributor of a broad range of industrial chemicals, which it distributes through its three subsidiaries: Van Waters & Rogers Inc. in the United States, Van Waters & Rogers Ltd. in Canada, and Univar Europe N.V. Chemicals distributed by Univar are purchased from manufacturers and then resold by Univar to various industries. Serving an estimated $27 billion market, Univar quickly established a considerable presence in the chemical distribution industry, both in North America and abroad, with approximately 150 distribution offices located throughout the United States, Canada, and Europe.

In 1966, the merging of two Seattle-based companies formed what is now known as Univar. While this date marks the formal creation of Univar, the essence of the corporation begins with the driving force behind the 1966 merger: Van Waters & Rogers. The history of Van Waters & Rogers began with a bridge game in Seattle in 1924.

The card game brought together for the first time two individuals who would figure prominently in Univar’s history—George Van Waters and Nat S. Rogers. Van Waters had arrived in Seattle four years earlier to work for the P. W. Patterson Company, distributors of cotton linters, linseed oil, tallow, and cotton seed oil. After two years, Van Waters had earned enough money to buy the company’s Seattle territory. During this time, Rogers decided to leave his studies at the University of Washington in 1921 and began working as a chemist for a plywood adhesives firm. When the two men met in 1924, they decided to enter into business together and, before the summer was over, Van Waters & Rogers had been incorporated.

Each of the hopeful entrepreneurs, both in their mid-twenties, contributed $2,500 to start the business, which initially sold paint, cotton linters, raw materials, and naval supplies at wholesale from a small sales office they had rented. Van Waters, the more effective salesman of the budding team, sold the products over the telephone, while Rogers assumed the administrative duties. By the end of their first year of business, which now included selling laundry and industrial chemicals, Van Waters and Rogers had parlayed their initial investment of $5,000 into $80,000 in revenues. Van Waters—who developed the curious habit of sticking his head under his desk while speaking long distance on the telephone, yet sat upright if the call was local— proved to be an effective salesperson, while Rogers, with his experience in chemistry, astutely led the company toward diversification and expansion in the industry.

By 1926, the company had added soap, bleach, and allied products to its line and had also established a laundry supplies department. Two years later, the partners made their first acquisition, purchasing Bourret Kirkwood Company, a laundry and dry cleaning supply firm, after which their revenues doubled. Van Waters and Rogers next began a series of acquisitions that expanded the company’s presence southward. In 1932, they purchased S.L. Abbott Co. in Portland, Oregon, and, four years later, they purchased a cotton linters sales company in Los Angeles. In 1939, Van Waters and Rogers set their sights east of Seattle and purchased the Arthur Pittack Company in Spokane, Washington, thereby creating the company’s feed and fertilizer department. That year, encouraged by their success at selling almost any product they took on, the partners entered into the upholstery supply and textile field.

By the late 1930s, the company had opened offices in Portland, Oregon, and Spokane, Washington, and had offered ownership in the business to its key personnel. Department and branch managers had been granted almost full autonomy, the only stipulation being that they succeed in whatever they chose to market. Since its inception the company had operated in the black, posting profits throughout the Great Depression. This success, coupled with considerable freedom and responsibility given to the sales managers, led to a somewhat incongruous pattern of diversification, first evidenced by the company’s move into industrial textiles. This wide-ranging style would continue for many years and would be indicative of Univar’s disparate business concerns throughout much of its history. In this sense, the late 1930s and the early 1940s were defining years for both Van Waters & Rogers and Univar. Perhaps the most illustrative example of this rather haphazard style of growth occurred as World War II was ending, when a department manager purchased a carload of extra-large men’s pajama tops. Clearly well beyond the parameters of Van Waters & Rogers’ product line, the tops, without matching bottoms, were sold for use as rags to a company in the machine tool industry.

For the first 26 years of its existence, Van Waters & Rogers grew by purchasing small companies. In 1950 the company made its first major purchase, acquiring San Francisco-based Braun-Knecht-Heimann (B-K-H). Twenty years earlier, Van Waters & Rogers had been awarded a contract for the Northwest sales of the chemicals distributed by B-K-H. This arrangement eventually evolved into an agreement that granted Van Waters & Rogers the exclusive distributing rights for B-K-H chemicals. As part of the B-K-H purchase, Van Waters & Rogers obtained a 50 percent stock interest in Scientific Supplies Company, a Seattle-based scientific apparatus distribution company; they purchased the remaining percentage three years later.

In 1951 Van Waters & Rogers secured a foothold in Canada by purchasing Industrial Materials Ltd. in Vancouver, British Columbia. Established as Van Waters & Rogers Ltd., the Canadian subsidiary spread across the country, acquiring chemical distribution companies that eventually lent considerable strength to Van Waters & Rogers North American presence.

By the early 1950s, the core of Van Waters & Rogers’ product line, which Univar would inherit, had been established. In the remaining years before the 1966 merger, Van Waters & Rogers continued to expand, acquiring companies in Los Angeles, Dallas, and St. Paul, Minnesota.

The other player in the Univar merger, a company that began as United Pacific Corporation, had been operating in Seattle for almost as long as Van Waters & Rogers, but had experienced a more tumultuous history. In 1925, two bankers from Tacoma, Washington, Ben S. Ehrlichman and Roscoe Drumheller, decided to enter into the investment banking business and formed Drumheller & Ehrlichman. Four years after its inception, the company, newly named United National Corporation, purchased United Pacific Insurance Company, United Pacific Realty, and Ferris & Hargrove, an investment banking company. For a young corporation beginning with $25,000 in capital, these three acquisitions, with a combined net worth of over $18 million, represented a bold move that earned the two partners a national reputation as prudent and shrewd investors.

However, their business acumen was put to a test in the same year, as the stock market crashed. Believing their holdings would withstand the economic turmoil that swept through the country, Ehrlichman and Drumheller, whose investments included the ownership of several commercial buildings in Seattle, continued to augment their real estate holdings. When a majority of the tenants reneged on their lease agreements, the results were catastrophic. The company’s preferred stock plummeted from $50 a share to 25 cents, and Drumheller withdrew from the business. The corporation teetered on the brink of failure, but survived, making a slow recovery during World War II.

In 1958, United National Corporation became United Pacific Corporation. Ehrlichman relinquished his controlling interest in the corporation to a group of Seattle area businessmen, one of whom was Nat S. Rogers. In 1964, With Rogers as a board member, United Pacific, underwent a complete restructuring. As part of this process, in which some subsidiaries were sold and others established as independent operating entities, United Pacific began to invest in Van Waters & Rogers. This confluence of Nat Rogers’ business concerns led to the merger of United Pacific and Van Waters & Rogers two years later, in 1966, creating VWR United Company.

The formation of the new company—which retained the VWR United name until 1974 when it was renamed Univar—brought together two disparate forces with divergent operating philosophies and business interests. Since it first opened for business, Van Waters & Rogers had aggressively expanded, acquiring companies and broadening its product line at a brisk rate. United Pacific, on the other hand, had a history of cautious growth, engendered by a conservative investment policy that was largely the result of Ehrlichman’s nearly disastrous experience during the Great Depression. When these two contrary business strategies came under one leader, the result resembled Van Waters & Rogers much more than United Pacific. Indeed, the newly formed VWR United was, in effect, Van Waters & Rogers with a new name and a larger capital base. In this respect, the merger created a more powerful Van Waters & Rogers, a company with an enhanced ability to expand and diversify.

This new strength was put to use throughout the 1970s and early 1980s, as VWR United acquired a substantial array of chemical and scientific supply companies. Acquisitions during this period included Will Scientific in Rochester, New York; Penick & Ford Ltd., a subsidiary of R.J. Reynolds Industries; and Trek Photographic, a division of Eastman Kodak. While these acquisitions bolstered the company’s chemical and scientific holdings, additional purchases stretched the parameters of its business interests. In 1976, Univar purchased the Great Western Malting Company, the largest maltster on the West Coast.

By the early 1980s Univar had become a diverse chemical and scientific distributor involved in graphic arts, fabrics, and agricultural processing, as well as a supplier to furniture and interior design industries. Expansion and diversification, undertaken to counteract any recessive periods suffered by a particular Univar product line, had created a company with a broad spectrum of business interests and revenues of over $900 million. For Univar’s management, this spectrum had become too broad by the beginning of the 1980s, and the corporation began divesting itself of certain segments of its business, forming them into separate, independent companies.

First to undergo this process, in 1984, were the corn, potato, and barley processing operations obtained through the purchase of Great Western Malting Co. and Penick & Ford Ltd. The new, independent company, PENWEST, LTD., manufactured brewer’s malt for breweries, produced treated starches for the textile and paper industries, and served as the model for another spin-off two years later. VWR Corporation was formed when Univar was effectively divided into two corporations of roughly equal size. The removal of VWR Corporation’s product lines stripped Univar of what its management had determined were peripheral business interests, enabling the corporation to concentrate solely on the distribution of industrial and textile chemicals and pest-control supplies through its two subsidiaries, Van Waters & Rogers Inc. and Van Waters & Rogers Ltd.

The removal of Univar’s grain processing operations and its laboratory and non-chemical distribution business, however, also removed an appreciable portion of Univar’s revenues. Penick & Ford and Great Western Malting had accounted for $127 million before their departure, and the revenues now collected by VWR Corporation nearly matched those of Univar, which, after the two spin-offs, stood at $543 million. In order to recoup the losses and increase its size, Univar began looking for an acquisition consistent with its renewed commitment to the industrial chemical distributing business.

In 1986, a suitable company was found. The acquisition of McKesson Corp.’s chemical distribution operations, McKesson Chemical Co., more than made up for the loss of PENWEST and VWR Corporation. With 65 branch offices and sales of over $600 million, the addition of San Francisco-based McKesson doubled Univar’s revenues, making it North America’s largest chemical distributor. Univar’s rise to the top, however, came with a hefty price tag and a complex purchasing arrangement that ceded an approximately 31 percent interest in Univar to a Dutch holding company. In order to reach the $76 million required to purchase McKesson, Univar arranged for Royal Pakhoed N.V., a 350-year-old Dutch company providing chemical storage, transportation, and distribution services, to capitalize a U.S. subsidiary with $26 million. Univar then loaned the subsidiary $50 million to purchase McKesson. After the subsidiary purchased the chemical company, Pakhoed transferred its ownership to Univar in exchange for approximately three million shares of Univar’s stock, leaving the Dutch company with a sizable interest in Univar.

Two years passed before Univar was able to overcome the expenditures made in the McKesson acquisition. After posting $693 million in sales in 1987, revenues leapt to $1.12 billion in 1988, marking the first time the corporation had reached the $1 billion plateau. That year, Univar formed a national waste management service, called Chemcare, to operate as a unit under Van Waters & Rogers Inc. Through Chemcare, Univar began collecting and transporting hazardous waste produced by client businesses to qualified treatment, storage, and disposal facilities.

Once the extensive transformation of the 1980s was completed and the benefits of the McKesson acquisition were fully realized, Univar once again set its sights on acquiring additional companies. The company’s position in the U.S. market had been strengthened by the McKesson purchase, especially in the East and Midwest, so Univar looked toward Canada and Europe for potential companies. In 1991, as the corporation’s earnings suffered from a worldwide economic recession, Univar purchased Hacros Chemicals Canada Inc., which further solidified the corporation’s standing as the largest chemical distributor in Canada. Hacros’ $90 million in sales boosted Van Waters & Rogers Ltd. total revenues to $325 million, the majority of which was reaped from the western regions of the country.

Earlier in the same year, Univar entered the European chemical distribution market for the first time through a partnership with the corporation’s Dutch facilitator in the McKesson acquisition, Pakhoed Holding, N.V. Pakhoed’s investment company, Pakhoed Investeringen B.V., joined with Univar to form Univar Europe N.V. as a subsidiary. Through Univar Europe, 51 percent of which was owned by Univar and the remaining 49 percent by Pakhoed Investeringen, Univar acquired Beijer Industrial Distribution Group, a Swedish company with $380 million in sales at the time of the purchase, from Beijer Industries. Beijer, the fourth largest chemical distribution company in Europe, operated through 17 European offices in Scandinavia, the United Kingdom, Switzerland, and Italy. As with the McKesson acquisition, the purchase of Beijer was funded through the sale of Univar’s stock—1.9 million shares to The Dow Chemical Company, representing $30.9 million—and, again like McKesson, the addition of Beijer substantially affected the scope of Univar’s operations. Considering that the European chemical distribution market was larger than the North American market, this initial foray into Europe represented a significant step toward Univar’s bid to increase its global presence.

As Univar planned for the future, the corporation’s prospects for further expansion were beginning to brighten as it slowly recovered from the economic recession of the early 1990s. After recording a net income loss of $5.6 million in fiscal 1992, Univar returned to posting a profit of $5.1 million in fiscal 1993, largely as a result of an upsurge in business during the final two quarters. Additional acquisitions in Europe were also expected, providing that expansion remained an economically sound option. Within the estimated $11 billion chemical distribution market in Europe in 1993, Univar Europe posted sales of $290 million compared with the $1.2 billion Van Waters & Rogers Inc. recorded in the $14.5 billion U.S. market. Univar hopes to ameliorate this disparity in market share in the years ahead.