Akzonobel to Sell Speciality Chemicals Business to Carlyle Group and GIC

Akzo Nobel has agreed to sell its speciality chemicals business to US private equity firm Carlyle Group and Singapore’s GIC for Euro 10.1-bn ($12.6-bn), including debt. AkzoNobel expects the net proceeds from the transaction to be around Euro 7.5-bn. The vast majority of net proceeds will be distributed to shareholders.

The sale, for a slightly better than expected price, will allow Akzo to focus on its main paints and coatings business. It delivers one of the biggest commitments made by Akzo Nobel in its defence against a Euro 26-bn ($32-bn) takeover offer from US rival PPG Industries last year.

The company considered both a private sale and a separate stock listing for the chemicals division, ultimately concluding that a sale to Carlyle was in the best interest for all involved “including employees, shareholders and customers”. “Carlyle has significant experience in the chemicals industry and a proven track record when it comes to health, safety, innovation and sustainability,” Akzo Nobel’s CEO Mr. Thierry Vanlancker said.

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. Parts of the speciality-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 deal leaves Akzo as “one of the top 3 largest paints and coatings companies in the world,” Mr. Vanlancker said. He said the company must now deliver on a goal to achieve a 15 percent margin on sales by 2020, after that measure fell to 9.4 percent last year. That goal will mainly be delivered through cost savings and efficiency measures, Mr. Vanlancker said, as overall sales growth in the paints and coatings market is expected to remain modest. “We will be looking at size (acquisition) opportunities as they come along. But size is really not top of mind, it’s performance of the business,” he said.