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AkzoNobel Weighs Deal with BASF
A recent industry speculation concerning Dutch paint and specialty chemicals firm AkzoNobel and German chemical giant BASF has been put to rest.
In a brief statement issued Thursday (Feb. 11), AkzoNobel confirmed it is in the midst of talks with BASF about purchasing BASF's Industrial Coatings business unit.
AkzoNobel, one of the largest paint and coatings manufacturers in the world, indicated its strategy to drive operational excellence and organic growth includes the possibility of pursuing value-generating, bolt-on acquisitions.
It also said that no further details will be made available at this time.
While BASF has not yet issued a formal announcement of its own, a spokesperson confirmed the talks in an email.
"We confirm that BASF is in discussion with AkzoNobel with regard to a potential sale of our Industrial Coatings business," wrote Benjamin Rusch, media relations manager, BASF. "No further details will be made available at this stage."
Business Rationale
According to Reuters, the news agency spoke with several people knowledgeable of the arrangement in November. At that time, the sources indicated that BASF had plans to sell the business unit, adding that the deal could be worth approximately 500 million euros ($566 million).
BASF, the global chemical industry leader by sales, had indicated it was open to find new owners for business segments that are feeling competitive pressures from low-cost rivals, the agency said. It is also splitting off its pigments line ahead of a potential sale.
Its industrial coatings operation is said to be too small to compete effectively, as opposed to its much larger automotive division (said to generate as much as 77 percent of sales) and consumer segment, industry experts told the agency.
A business analyst agreed, telling chemical industry news site ICIS that the industrial coatings division is a better fit for Akzo’s business portfolio, specifying that the BASF segment includes international coil coatings operations, as well as foil and paint, wind and general industry coatings.
“BASF doesn’t seem to feel that it has critical mass in the business,” said Oliver Schwarz, chemicals equity analyst at Warburg Research in Germany. “It claims to be number three in Europe, but is way off from [that] when it comes to global production of coil coatings.”
BASF’s industrial coatings segment showed approximate sales of €240 million (about $272 million) in 2014, or 8 percent of coatings sales of €2.98 billion ($3.38 billion), IHS Chemical Week reported.
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Sources told Reuters in November that BASF had plans to sell the business unit in a deal that could be worth approximately 500 million euros ($566 million). |
AkzoNobel sees a large portion of its business generated by its industrial coatings segment, specifically marine and construction coatings, so the coil business appears to be a good fit for the company.
“Coil coatings would fit perfectly with the coil coatings activities AkzoNobel already has, because that is very much attached to the construction coatings that they offer,” Schwarz said.
AkzoNobel's industrial coatings line had sales of around €780 million (about $884 million), or 14 percent of the company's performance coatings sales of €5.59 billion ($6.33 billion) in 2014, IHS added.
Industrial Coatings Business
According to its website, BASF’s Industrial Coatings division focuses on coatings with protective properties. It supplies a broad portfolio of high-performance colored pigments, effect pigments and resins for all areas of industrial coatings like marine, can, coil and wood coatings, it says. It also addresses changing industry needs through raw materials that meet the increasing demand for eco-friendly solutions.
Its industrial coatings are produced at Münster and Oldenburg, Germany, Chemical Week noted. Among its systems for coating industrial products its portfolio includes e-coats, spray and dip coatings, which are used for industrial buildings, radiator components, household appliances and wind turbines.
AkzoNobel’s Performance Coatings division covers a diverse range of applications, including fouling control, color matching, surface design and fire protection in markets ranging from construction and consumer electronics to transport and sports equipment.
Its portfolio includes high-performance paints and coatings for ships, yachts, cars, trucks and buses, industrial installations, structural steel, architectural components, beverage cans, furniture, aircraft, mobile devices and flooring.
