Akzo Nobel has agreed to sell its specialty chemicals business to investors led by U.S. private equity firm Carlyle Group for 10.1 billion euros ($12.6 billion), including debt -- a milestone for the Dutch company as it struggles to recover from a tempestuous 2017.
Akzo Nobel has agreed to sell its specialty chemicals business to investors led by U.S. private equity firm Carlyle Group for 10.1 billion euros ($12.6 billion), including debt — a milestone for the Dutch company as it struggles to recover from a tempestuous 2017. The sale to Carlyle and Singapore’s GIC sovereign wealth fund for a slightly better than expected price will allow 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 26 billion euro ($32 billion) takeover offer from rival PPG Industries last year. 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 last July after the bid battle, said he expects 7.5 billion euros in net proceeds from the sale, and vowed to return the “vast majority” to shareholders. The deal leaves Akzo as “one of the top 3 largest paints and coatings companies in the world,” Vanlancker said on a conference call. “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.”
He said Akzo must now deliver on a goal to achieve a 15 percent margin on sales by 2020. Shares rose 3.8 percent to 77.96 euros by 0745 GMT. That is still well short of the figure of around 95 euros in the cash and share offer from PPG last year. DEFENCE PLAN Analyst Wim Hoste of KBC said the sale price for Speciality Chemicals represented a multiple of 9.8 times core earnings, “which is a bit higher … than we were banking on.”
Hoste increased his 12-month target price to 80 euros per share “but as the overall upside vs the current share price remains relatively limited, we decided to stick to our Hold rating,” he said in a note. Bankers advising potential buyers had said they expected the business to fetch an enterprise value of 8-9 times the unit’s expected earnings before interest, tax, depreciation and amortization (EBITDA).
Carlyle had been vying for the asset with U.S. 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 had told Reuters. The division produces an array of chemicals used in plastic packaging, tissue paper, cleaning materials, pharmaceuticals, food products, salts and adhesives. Akzo first announced plans to sell the business last April, 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 U.S. 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 last year on health grounds. Burgmans is due to retire after next month’s annual meeting, with former Maersk CEO Nils Andersen nominated to take his place. Vanlancker said Akzo had extracted promises from Carlyle to keep the chemicals company’s head offices in the Netherlands, though it made no commitment to retain all of the business’s 2,500 employees in the Netherlands. The deal is subject to regulatory approvals and is expected to be concluded before the end of the year, Akzo said. ($1 = 0.8023 euros)