Hempel Reveals $1.2 Billion Ready for Deals to Double Its Size
(Bloomberg) -- Hempel A/S wants to double its size in less than half a decade and plans to buy smaller rivals to help it achieve that goal.
The closely held Danish maker of the Crown household paint is in talks with targets and has about 1 billion euros ($1.2 billion) in funds and banking facilities available to spend, Chief Executive Officer Lars Petersson said in an interview. The company will use that added scale to help it supply clients such as Vestas Wind Systems A/S and home-improvement chain B&Q.
The coatings market is in a fresh wave of consolidation after a temporary dip during the height of the coronavirus pandemic. PPG Industries Inc. announced three deals in the past month, including the planned $1.6 billion takeover of Finland’s Tikkurila Oyj, a close rival of Hempel.
“You either have to be a niche player and good at what you do, or you have to be big so you have the scale and investment needed,” said Petersson, who joined the company in 2015 and became CEO 1 1/2 years ago. “We are already too big to be niche, and we’re too small to be big, so growing is necessary.”
Petersson spent his first years at Hempel increasing efficiency. He’s now refocusing the group and pulling out of marginal markets. In South America, for example, that means dropping Peru and Ecuador in order to concentrate on Brazil and Argentina and forming a broader Americas division.
“We are spread too thinly,” he said. “Being so global despite our mid-size in our industry has led to us being a bit too shallow. We’ll walk away from some positions where we are too weak.”
Hempel will also embark on a phase of heavy investment to get revenue to its goal of 3 billion euros in five years’ time. Growth will likely be equally split between internal expansion and M&A. While the number of potential targets has increased recently, so have valuations, which remain high, Petersson said.
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