Buffett-Backed Axalta Jumps as Company Weighs Selling Itself
Buffett-Backed Axalta Surges as Company Considers Selling Itself
(Bloomberg) -- Axalta Coating Systems Ltd. surged the most in more than a year as the frequent takeover target backed by Warren Buffett’s Berkshire Hathaway Inc. put itself up for sale under a review of strategic options.
A special committee also will look at changes in capital allocation and how the company is executing its strategic plan, the maker of automotive coatings said in a statement Wednesday. The committee will be led by independent director Mark Garrett and include Chief Executive Officer Robert Bryant and independent director Samuel Smolik.
Axalta long has been on the radar of large coatings companies, including PPG Industries Inc., Akzo Nobel NV and Nippon Paint Holdings Co. With a market value of $6 billion, Axalta’s size could move the needle for a large player with fewer complications and antitrust hurdles that might accompany a merger of equals.
“This is the next round of the continuing consolidation we have seen in the coatings industry,” said Martin Bastian, managing director and head of European Chemicals at Houlihan Lokey. “There is still a positive valuation and financing environment.”
The stock jumped 15% to $29.60 at 11:13 a.m. in New York, the most intraday since October 2017. Axalta rose 10% this year through Tuesday, while a Russell 1000 materials index climbed 15%.
Axalta could be valued at $49 a share, Seaport Global analyst Michael Harrison said in a note to investors. He valued the company at 15 times earnings, using Sherwin-Williams Co.’s 2017 purchase of Valspar Corp. as a guide.
Sold by DuPont in 2013, Philadelphia-based Axalta was overhauled under the ownership of Carlyle Group, which installed industry veteran Charlie Shaver as CEO. When Carlyle exited three years ago, it was the private equity firm’s best returning investment for 28 years.
Buffett’s Berkshire Hathaway is Axalta’s largest investor, holding 10% of shares outstanding, according to data compiled by Bloomberg.
The supplier of spray paint and metal treatments for automotive chassis is testing the waters amid a healthy appetite for deals in the sector. There’s been no respite in the historically high levels of chemical mergers this year, despite volatile share prices and a slowdown in end markets, such as electronics and cars, according to a June report by Valence Group. Valuations also have held up, with deal multiples averaging about 11 to 12 times earnings, the deal advisory firm said.
Nevertheless, W.R. Grace & Co. spinoff GCP Applied Technologies Inc. attempted to gauge takeover interest in a similar move, but opted last month to remain an independent company after offers fell short of demands. Axalta is seeking to capitalize on having 90% of last year’s sales come from markets where it represented either the No. 1 or No. 2 position globally.
The company made no assurance regarding the outcome or timing of the review, and said it would make no further public comments until the evaluation complete.
Evercore and Barclays are advising the company, with Morrison & Foerster LLP serving as legal counsel.
--With assistance from Joshua Fineman.
To contact the reporter on this story: Andrew Noël in London at anoel@bloomberg.net
To contact the editors responsible for this story: Brendan Case at bcase4@bloomberg.net, Tony Robinson
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