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What is the story about?
Akzo Nobel NV has agreed to acquire smaller rival paint maker Axalta Coating Systems Ltd. in a cross-border share deal that values the target at €7.9 billion ($9.2 billion).
The agreement, which confirmed an earlier report by Bloomberg News, follows several attempts at a combination by the Dulux and Cromax paint makers. One previous effort fell short in 2017, when talks broke down as the two failed to agree on terms.
Tuesday’s agreement will see shareholders receive 0.6539 Akzo Nobel shares for each Axalta common share, giving an equity value of €7.9 billion, according to a Bloomberg calculation. Akzo Nobel shareholders will own 55% of the combined company, which will move its listing to New York.
The Dutch company’s stock fell as much as 4.4% in Amsterdam early Tuesday, the steepest intra-day drop since Oct. 22.
Tariffs and a slowing economy have been weighing on the coatings industry, with Akzo Nobel last month lowering its earnings outlook because customers have been spending less. It has been overhauling its strategy to cut costs and boost efficiency, closing some European sites and shedding 2,500 jobs. Efforts to consolidate the industry have been underway for years. In 2017, Akzo Nobel fended off a takeover bid from US rival PPG Industries Inc.
“This is a combination that we’ve looked at multiple times in the past, but this is also a combination that the markets have been asking for for a long time,” Chief Executive Officer Gregoire Poux-Guillaume said in an interview. “There were further attempts since 2017. Now, from a business perspective, it makes too much sense to ignore.”
The new company will in time end trading in Amsterdam to move to the New York Stock Exchange, with a majority of Akzo Nobel shares already held by US investors, according to Poux-Guillaume. It’ll be domiciled in the Netherlands with dual headquarters in Amsterdam and Philadelphia.
The deal, with an enterprise value of about $25 billion, combines companies with strengths in business-to-business as well as consumer markets. Axalta, a former division of DuPont de Nemours Inc., makes finishing materials for a variety of industrial uses, including powder coatings used in auto manufacturing. Akzo Nobel owns a number of consumer brands, including Dulux, Cuprinol and Hammerite, along with Polyfilla crack fillers.
The combined business will span more than 160 countries and drive run-rate synergies of about $600 million, 90% of which are expected within the first three years of the close of the transaction, according to a statement.
“The macro environment is impacting both companies in the same way and therefore there isn’t anybody that’s gaining an advantage from that macro environment,” Poux-Guillaume, adding the targeted recurring cost synergies were “really reassuring for shareholders” because “that stuff is mechanical.”
This year, Cevian Capital has built a 5% stake in Akzo Nobel, putting its weight behind a strategy change. The activist investor’s involvement in other European companies has often pushed its targets toward mergers and acquisitions. Cevian wasn’t involved in the decision to merge with Axalta, Poux-Guillaume said.
Axalta went public in 2014, a year after private equity firm Carlyle Group Inc. acquired the company from DuPont. Axalta’s brands include Cromax, Spies Hecker and Standox.
Tuesday’s deal adds too a flurry of activity in the coatings sector. Carlyle agreed in October to buy control of BASF SE’s coatings business, creating a standalone company with an enterprise value of €7.7 billion. The German chemicals company agreed in February to sell its Brazilian paint business to Sherwin-Williams Co. for $1.15 billion.
Morgan Stanley & Co International Plc acted as financial adviser for Akzo Nobel with De Brauw Blackstone Westbroek N.V. and Davis Polk as legal counsel.
Evercore Inc and J.P. Morgan Securities LLC co-led as financial advisers to Axalta, as well as Incentrum Group.
Read Also: Capitalmind Mutual Fund introduces liquid scheme to expand debt line-up
The agreement, which confirmed an earlier report by Bloomberg News, follows several attempts at a combination by the Dulux and Cromax paint makers. One previous effort fell short in 2017, when talks broke down as the two failed to agree on terms.
Tuesday’s agreement will see shareholders receive 0.6539 Akzo Nobel shares for each Axalta common share, giving an equity value of €7.9 billion, according to a Bloomberg calculation. Akzo Nobel shareholders will own 55% of the combined company, which will move its listing to New York.
The Dutch company’s stock fell as much as 4.4% in Amsterdam early Tuesday, the steepest intra-day drop since Oct. 22.
Tariffs and a slowing economy have been weighing on the coatings industry, with Akzo Nobel last month lowering its earnings outlook because customers have been spending less. It has been overhauling its strategy to cut costs and boost efficiency, closing some European sites and shedding 2,500 jobs. Efforts to consolidate the industry have been underway for years. In 2017, Akzo Nobel fended off a takeover bid from US rival PPG Industries Inc.
“This is a combination that we’ve looked at multiple times in the past, but this is also a combination that the markets have been asking for for a long time,” Chief Executive Officer Gregoire Poux-Guillaume said in an interview. “There were further attempts since 2017. Now, from a business perspective, it makes too much sense to ignore.”
The new company will in time end trading in Amsterdam to move to the New York Stock Exchange, with a majority of Akzo Nobel shares already held by US investors, according to Poux-Guillaume. It’ll be domiciled in the Netherlands with dual headquarters in Amsterdam and Philadelphia.
The deal, with an enterprise value of about $25 billion, combines companies with strengths in business-to-business as well as consumer markets. Axalta, a former division of DuPont de Nemours Inc., makes finishing materials for a variety of industrial uses, including powder coatings used in auto manufacturing. Akzo Nobel owns a number of consumer brands, including Dulux, Cuprinol and Hammerite, along with Polyfilla crack fillers.
The combined business will span more than 160 countries and drive run-rate synergies of about $600 million, 90% of which are expected within the first three years of the close of the transaction, according to a statement.
“The macro environment is impacting both companies in the same way and therefore there isn’t anybody that’s gaining an advantage from that macro environment,” Poux-Guillaume, adding the targeted recurring cost synergies were “really reassuring for shareholders” because “that stuff is mechanical.”
This year, Cevian Capital has built a 5% stake in Akzo Nobel, putting its weight behind a strategy change. The activist investor’s involvement in other European companies has often pushed its targets toward mergers and acquisitions. Cevian wasn’t involved in the decision to merge with Axalta, Poux-Guillaume said.
Axalta went public in 2014, a year after private equity firm Carlyle Group Inc. acquired the company from DuPont. Axalta’s brands include Cromax, Spies Hecker and Standox.
Tuesday’s deal adds too a flurry of activity in the coatings sector. Carlyle agreed in October to buy control of BASF SE’s coatings business, creating a standalone company with an enterprise value of €7.7 billion. The German chemicals company agreed in February to sell its Brazilian paint business to Sherwin-Williams Co. for $1.15 billion.
Morgan Stanley & Co International Plc acted as financial adviser for Akzo Nobel with De Brauw Blackstone Westbroek N.V. and Davis Polk as legal counsel.
Evercore Inc and J.P. Morgan Securities LLC co-led as financial advisers to Axalta, as well as Incentrum Group.
Read Also: Capitalmind Mutual Fund introduces liquid scheme to expand debt line-up
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