Akzo Nobel sells chemicals unit
• Dutch multinational group to offload business to Carlyle Group and Singapore's wealth fund in deal worth €10bn
Akzo Nobel will sell its chemicals business in a €10.1bn deal to buyers led by Carlyle Group, the maker of Dulux paints said on Tuesday, making good on a promise made as it fought off a takeover in 2017.
The sale of the Specialty Chemicals operation to Carlyle and Singapore’s GIC sovereign wealth fund for a slightly better than expected price will enable Akzo to focus on its main paints and coatings business.
It delivers one of the biggest commitments made by Akzo Nobel in its defence against a €26bn takeover offer from US rival PPG Industries. It may also help to repair strained relationships with shareholders unhappy with the rejection of the bid.
Akzo Nobel CEO Thierry Vanlancker, who took charge in July 2017 after the bid battle, expects €7.5bn in net proceeds from the sale. The €10.1bn valuation includes debt. The division being sold produces an array of chemicals used in plastic packaging, tissue paper, cleaning materials, pharmaceuticals, food products, salts and adhesives.
The €7.5bn total will be returned to shareholders, Vanlancker told Reuters, with the company deciding on the distribution through dividends or share buybacks in the coming months. The deal leaves Akzo as “one of the top three largest paints and coatings companies in the world”.
Vanlancker said Akzo must now deliver on a goal to achieve a 15% margin on sales by 2020, after that measure declined to 9.4% in 2017.
That goal will mainly be delivered through cost savings and efficiency measures, he said, as overall sales growth in the paints and coatings market is expected to remain modest.
“We will be looking at size [acquisition] opportunities as they come along. But size is really not top of mind, it’s performance of the business.”
The remaining Akzo business will have 35,700 employees, while Speciality Chemicals employs about 10,000. Akzo will try to strengthen its position in promising markets such as powder coatings, which showed 10% global growth in 2017, the CEO said.
Akzo also expects its sales of decorative paints in China and Europe to increase.
The share price rose 2.9% to €77.28 in early afternoon trade. That is still well short of the figure of about €95 in the cash and share offer from PPG in 2017.
Analyst Wim Hoste of KBC said the sale price for Specialty Chemicals represented a multiple of 9.8 times core earnings, “which is a bit higher … than we were banking on”.
Bankers advising potential buyers had said they expected the business to fetch an enter- prise value of eight to nine times the unit’s expected earnings before interest, tax, depreciation and amortisation.
Carlyle had been vying for the asset with US private equity firm Apollo and its consortium partner, Dutch fund PGGM, as well as Dutch investor Hal Investments, and Advent International partnered with Bain Capital Private Equity, people familiar with the matter said.
Akzo first announced plans to sell the business in April 2017, when PPG was in full pursuit.
Many shareholders were dismayed as Akzo’s boards appeared uninterested in talks with PPG and when they ultimately rejected the US company’s best offer. With support from Dutch politicians, Akzo argued a takeover was not in the interest of other stakeholders, including employees.
Shareholders sued unsuccessfully to have chairman Antony Burgmans removed.
Akzo’s CEO and chief financial officer both resigned in 2017 on health grounds.
Burgmans is due to retire after April’s annual meeting, with former Maersk CEO Nils Andersen nominated to take his place.
Vanlancker said Carlyle promised to keep the chemicals firm’s head offices in the Netherlands, though it made no commitment to retain all of the business’s 2,500 employees in the Netherlands.