JSW Paints of the Sajjan Jindal-led JSW group on Friday said it was acquiring a 74.76% stake in Akzo Nobel India — the owner of Dulux — for Rs 8,986 crore, following months of negotiations. The deal, at an estimated enterprise value of Rs 12,000 crore, will make JSW Paints the fourth-largest paints maker in the country, after Asian Paints, Berger Paints and Kansai Nerolac.
The share purchase from Dutch multinational Akzo Nobel NV and its affiliates, which has been announced at a price of Rs 2,762.05 apiece, is at a 13.48% discount to Akzo Nobel’s Thursday closing price of Rs 3,192.60 on the BSE.
After the acquisition, JSW Paints’ estimated market share will go up to 9.2% from current 3%, according to industry experts. Asian Paints, Berger and Kansai Nerolac have market shares of 52%, 18% and 12%, respectively. The Aditya Birla Group’s Birla Opus — the latest entrant to the paints segment — has gained a market share of nearly 7% within a year of its launch.
The JSW Paints-Akzo Nobel deal will boost competition in India’s paints market, which is currently valued at Rs 80,000 crore, say analysts.
“Industry dynamics and market share of players will continue to get redrawn, as competition is set to grow with the latest deal,” Amnish Aggarwal, head of research at brokerage Prabhudas Lilladher, said. He said the deal happened at a significant discount, given that Akzo Nobel was trading lower than its peers on the bourses. Shares of Akzo Nobel India were up 8% intra-day on the BSE, following the announcement. The stock closed trade at Rs 3,414.75 apiece, up 6.96% versus Thursday’s close.
After the acquisition, paints will emerge as the third-biggest pillar for the JSW Group, after steel and cement, helping the conglomerate leverage distribution synergies across these verticals, analysts said.
“Paints and coatings is one of India’s fastest growing sectors. Akzo Nobel India is home to some of the most globally renowned brands like Dulux, International and Sikkens. We are excited to welcome them to the JSW family,” Parth Jindal, MD, JSW Paints, said.
The total transaction value, which has been pegged at Rs 9,400 crore, will include the stake purchase amount of Rs 8,986 crore and an additional payout of Rs 447 crore towards contingent considerations, JSW Paints said.
The acquisition will trigger the mandatory open offer, which will be done at Rs 3,417.77 per share — a premium over Akzo Nobel’s closing price on Thursday.
AkzoNobel NV had set in motion the process to sell its India paints business in October last year, drawing interest from most paints majors such as Berger, Pidilite Industries, Indigo Paints, Asian Paints and the Aditya Birla Group.
However, steep valuations saw most players opting out and only JSW Paints and a consortium of Advent and Indigo staying in the race. In the end, though, it was JSW Paints that managed to seal the deal.