Akzo Is Said to Put Apollo, Bain on Chemical Unit Shortlist

(Bloomberg) -- Akzo Nobel NV narrowed the list of bidders for its chemical division to four, with the team of Lanxess AG and private equity firm Apollo Global among those making the grade, people with knowledge of the matter said.

Carlyle Group, a partnership between Advent International and Bain Capital, and Dutch buyout firm Hal Investments BV are also in the running for the asset, said the people, who asked not to be identified because the matter is private. The maker of Dulux paint hasn’t yet decided whether to sell or spin off the business, which is expected to fetch about 10 billion euros ($12 billion).

A strong crop of bidders adds to Chief Executive Officer Thierry Vanlancker’s options as he attempts to break up the Amsterdam-based company to focus on coatings for homes and auto parts. Akzo Nobel has been under pressure since rejecting a $29 billion takeover offer from U.S. rival PPG Industries Inc. last year that sparked a battle with activist investor Elliott Management Corp.

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 in more specialty products such as ingredients used in personal-care products.

Akzo Nobel shares traded 0.1 percent lower at 74.86 euros as of 9:58 a.m. in Amsterdam, valuing the company at 18.9 billion euros.

‘Strong Interest’

First-round bids were submitted in late December, and this week Akzo Nobel alerted those who have qualified for the next round, said the people. KKR & Co. and CVC Capital Partners were working on a joint proposal but have left the process, the people said.

“We had very strong interest in the first round,” Akzo Nobel spokesman Leslie McGibbon said by phone on Tuesday. “We’re progressing now with four of the bidders. The dual-track process remains on track.”

Vanlancker has said keeping both the sale and spin off options on the table helps maintain “competitive tension” in the bidding process. Should offers fall short, Akzo Nobel could still walk away from the auction. That’s unlikely to be the preferred option of Elliott Management, which is upholding a truce called in August after taking legal action to try and force Akzo Nobel into negotiating with PPG.

PPG’s Options

A separation of the chemicals division would also have implications for PPG, should it seek to rekindle its pursuit of Akzo Nobel. The U.S. company would face a tax expense -- which the people familiar with the matter estimated at as much as $2.5 billion -- if it acquired its Dutch peer before the so-called cross-indemnity had elapsed. The same would go for any company targeting the separated chemicals division.

Although PPG indicated in November that it expects more coatings industry deal making over the next 12 to 18 months, CEO Michael McGarry has said he’s moved on from targeting Akzo Nobel. The Pittsburgh-based company, which has been an acquisition machine for years, has had to reflect on what went wrong with its approach on Akzo Nobel.

--With assistance from Aaron Kirchfeld

To contact the reporters on this story: Andrew Noël in London at anoel@bloomberg.net, Sarah Syed in London at ssyed35@bloomberg.net, Ellen Proper in Amsterdam at eproper@bloomberg.net.

To contact the editors responsible for this story: Anthony Palazzo at apalazzo@bloomberg.net, Tony Robinson, John Bowker

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