AkzoNobel to Sell Specialty Chemical Business
In the culmination of a process announced nearly a year ago, global coatings manufacturer AkzoNobel (Amsterdam) announced Tuesday (March 27) the 10.1 billion euro ($12.5 billion) sale of its Specialty Chemicals business to The Carlyle Group and Singapore’s sovereign wealth fund GIC.
The transaction, expected to be completed by the end of this year, results in the creation of what the company calls two focused businesses—AkzoNobel Paints and Coatings, and Specialty Chemicals, now owned by Carlyle and GIC.
Specialty Chemicals Spinoff
In the original announcement in April 2017, the global coatings manufacturer detailed that the plan was to sell or list the chemicals business (which accounted for about a third of sales and profits) within the next year. At the time, analysts valued the division at approximately 8 billion euros ($9.9 billion), based on the company’s 2016 operating profit of 629 million euros.
The separation of the Specialty Chemicals business has been discussed for some time, but the formal announcement was seen as a response to rival PPG Industries’ (Pittsburgh, Pennsylvania) repeated attempts at a takeover, which began in March 2017 and were at times contentious.
Until Tuesday's announcement, it was unclear whether the separation would take the form of a sale or a demerger. According to AkznoNobel, its Board of Management and the Supervisory Board concluded that a private sale of the Specialty Chemicals business to The Carlyle Group and GIC was in the best interest of the company and Specialty Chemicals itself, along with respective stakeholders.
"Today is a key milestone in creating two focused, high performing businesses, to generate value for all stakeholders,” said Thierry Vanlancker, CEO of AkzoNobel. “We delivered on our commitment to separate the Specialty Chemicals business and did so ahead of schedule.
"We are very pleased to announce the sale of Specialty Chemicals to The Carlyle Group and GIC. We believe the business is well positioned to capture growth opportunities and further improve performance. Carlyle has significant experience in the chemicals industry and a proven track record when it comes to health, safety, innovation and sustainability."
AkzoNobel says after the separation, it will remain one of the three largest paints and coatings companies in the world.
The Carlyle Group, a global alternative asset manager, reported deploying $22 billion into new investments in 2017, as well as raising $43 billion of capital across the platform. According to Carlyle, total balance sheet assets were $12 billion as of December 31, 2017.
AkzoNobel expects 7.5 billion euros in net proceeds from the sale, with the 10.1 billion euros valuation including debt. Vanlancker told Reuters that the 7.5 billion euros would be returned to shareholders. From there, the company will determine distribution through dividends or share buybacks in the coming months.
Focused on Coatings
According to Vanlancker, the deal leaves Akzo as “one of the top [three] largest paints and coatings companies in the world.”
"Specialty Chemicals is a strong and profitable business with highly skilled and motivated employees serving our customers every day with essential chemistry,” noted AkzoNobel Specialty Chemicals CEO Werner Fuhrmann. “As a focused chemicals company we will concentrate our efforts and resources to accelerate profitable growth.
"With this transaction, our business has an opportunity to achieve its full potential and we will continue to fulfil the current and future needs of our customers throughout the world."
Though listed as discontinued operations in its year-end report for 2017, AkzoNobel did list numbers for its Specialty Chemicals division and noted that revenue was up 4 percent (4.9 billion euros over 4.8 billion), volumes were up by 3 percent and EBIT was up 10 percent.
The transaction is still subject to customary closing conditions as well as relevant regulatory approvals. AkzoNobel acquired shareholder approval for the separation at the Extraordinary General Meeting held on November 30, 2017.