Akzonobel In Talks To Buy BASF’s Industrial Coatings Business
Dutch paint and coatings company Akzo Nobel is proposing to acquire the industrial coatings business of BASF for 475 million euros.
The Dutch chemicals company wants to buy the business in order to strengthen Akzo Nobel’s market position in terms of coil coatings. It’s a move being closely monitored by chemical industry headhunters and other experts in the field.
These coatings are added to coiled metal sheets which are made into a variety of industrial products, refrigerators, facades and window blinds.
BASF is the world’s largest chemicals maker in terms of sales and it supplies additives, binders and pigments within the coatings industry. The company, however, is committed to selling off businesses which face increasingly stiff competition from low-cost market rivals.
Akzo Novel, meanwhile, has a new strategy aimed at driving organic growth through value-adding acquisitions. The company’s chief executive said the proposed acquisition would strengthen the business’s position in an ‘important’ market.
The company is proposing to pay over eight times the predicted earnings from the asset in 2016, not including taxes, interest, amortization or depreciation.
The company already boasts the accolade of being one of the world’s biggest suppliers in the coil coatings market and has long been a focus for chemical coatings recruitment personnel and executive search specialists.
Market experts say that there is plenty of demand amongst peers for coatings assets – market conditions which should prove beneficial to BASF.
Data from Thomson Reuters shows that Akzo and BASF currently trade at 6.5 times and 6.7 times expected core earnings, in comparison to coatings groups such as PPG and Axalta, which trade at 9.4 and 8.7 times respectively.
Industry experts have said that the industrial coatings division of BASF does not have the necessary scale required for future effective competition, despite seeing 300 million euros of sales during 2015.
A Good Fit for Akzo
Akzo Nobel, however, believes the business will fit in well with its existing units, and the deal is expected to be completed later this year – something that is sure to interest chemical industry headhunters and other specialists in the field.
Akzo will then become the owner of a British and South African manufacturing plant. Experts believe that private equity players were put off from taking part in the auction for the business because only strategic players would have the plants required to make full use of a previously ‘asset-light’ BASF business.
BASF plans to keep its automotive coatings business, which accounts for around 77 per cent of its euro coatings division. This is worth three billion euros. Industrial coatings sales currently account for only a small proportion of this division’s business.