(Bloomberg) -- Akzo Nobel NV’s sale of its specialty chemicals unit to U.S. private equity firm Carlyle Group for 10.1 billion euros ($12.5 billion) is set to transform the Dutch company into a more focused supplier of paints and coatings.
The decision unveiled Tuesday comes a year after the manufacturer first rebuffed a hostile $29 billion takeover attempt by rival PPG Industries Inc., a move that helped pave the way for Chief Executive Officer Thierry Vanlancker to break up the company. With investors poised to get an estimated 6 billion-euro payout from the proceeds, Akzo Nobel shares rose as much as 5.7 percent, the most in almost a year.
A supervisory board meeting ran late into the night as executives discussed the bids submitted for the chemicals division and whether to sell or list it, the CEO said on a call after announcing the winner. Carlyle and Singapore sovereign-wealth partner GIC edged out competitors with a higher bid and by agreeing to keep the business intact and giving assurances on workers’ salaries and benefits.
“Different bids had different dimensions,” the CEO said on the call with reporters. “Carlyle saw it as a strong business as a whole.”
The sale caps a turbulent period for Akzo Nobel, marked by its successful defense against PPG and an acrimonious spat with activist investor Elliott Management. Vanlancker, who sought to keep Akzo Nobel’s future in its own hands, will now have to make good on ambitious financial targets set for 2020. These include a 50 percent return on sales and 15 percent margins, a profitability more in line with peers including its former suitor.
Akzo Nobel shares rose 2.9 percent to 77.28 euros as of 11:44 a.m. in Amsterdam as investors digested the terms of the sale. The bulk of the proceeds will be distributed to shareholders, as planned, Vanlancker said. Akzo Nobel made that pledge after its outright refusal to engage with PPG irked some investors, including Elliott. They stand to get an estimated 6 billion euros, according to Bernstein analyst Jeremy Redenius.
The changes afoot at Akzo Nobel extend further than the breakup, which the company said a year ago was under consideration after PPG’s offer was rejected. The maker of Dulux paint and Cuprinol wood treatments is filling the soon-to-be vacant role of chairman with outsider Nils Andersen, the former CEO of A.P. Moller-Maersk A/S and Carlsberg A/S. He’ll take over from Antony Burgmans, who played a key role in the defense against PPG, battling some investors who pushed for a deal.
Vanlancker said splitting from chemicals will now refresh Akzo Nobel’s “passion” for coatings as the global No. 3 company, and he will make sure the manufacturer has the “right size and tools.”
The Financial Times reported earlier that Carlyle’s bid beat proposals by rivals including a duo of Advent International Corp. and Bain Capital LP, and a group including Apollo Global.
Parts of the specialty-chemicals business are among Akzo Nobel’s most profitable and the division generates about 40 percent of the company’s adjusted operating income. The unit has a strong position in the commodity chemical chlorine market and products such as ingredients used in personal-care products.
The sale values the unit at 10.1 billion euros including net debt, Akzo Nobel said, adding that it expects to receive a cash payment of 8.9 billion euros. After deduction of expenses and some liabilities, the net proceeds are expected to be around 7.5 billion euros and “the vast majority” will be distributed to shareholders.
JPMorgan, HSBC, and Lazard advised the Dutch company on the sale, while Valence and Evercore worked with Carlyle on its proposal. Barclays, HSBC, and JPMorgan are leading the debt financing backing the transaction.
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