Akzo Nobel reshapes business with 10 billion euro sale
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[March 27, 2018]
By Toby Sterling and Bart H. Meijer
AMSTERDAM (Reuters) - Akzo Nobel will sell
its chemicals business in a 10.1 billion euro ($12.6 billion) 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 last year.
The sale of the Specialty Chemicals operation to Carlyle and Singapore's
GIC [GIC.UL] 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
defense against a 26 billion euro ($32 billion) takeover offer from U.S.
rival PPG Industries last year.
It may also help to repair strained relationships with shareholders
unhappy with the rejection of the bid.
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Akzo Nobel CEO Thierry Vanlancker, who took charge last July after the
bid battle, expects 7.5 billion euros in net proceeds from the sale. The
10.1 billion euro 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 7.5 billion euro 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 3 largest paints and coatings
companies in the world," Vanlancker said.
He said Akzo must now deliver on a goal to achieve a 15 percent margin
on sales by 2020, after that measure fell to 9.4 percent last year.
That goal will mainly be delivered through cost savings and efficiency
measures, Vanlancker 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", Vanlancker said. "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 around 10,000.
DEFENSE PLAN
Akzo will try to strengthen its position in promising markets such as
powder coatings, which showed 10 percent global growth last year, the
CEO said. Akzo also expects its sales of decorative paints in China and
Europe to increase.
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General view of the outside of AkzoNobel's new paint factory in
Ashington, Britain September 12, 2017. REUTERS/Phil Noble/File Photo
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Shares rose 2.9 percent to 77.28 euros by 1300 GMT. That is still well short of
the figure of around 95 euros in the cash and share offer from PPG last year.
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 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.
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.
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The deal is subject to regulatory approvals and is expected to be concluded
before the end of the year, Akzo said.
Lazard, JPMorgan Chase and HSBC advised Akzo Nobel on the sale. ($1 = 0.8023
euros)
(Reporting by Toby Sterling and Bart Meijer; Editing by Jason Neely and Keith
Weir)
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