SigmaKalon goes up for sale

11 June 2007 11:20  [Source: ICB]

Paints and coatings producer SigmaKalon has confirmed that its private equity owner, Bain Capital, is looking to dispose of the company. US-based Bain bought the Netherlands-based company from Total in early 2003 for around €1bn ($1.4bn).

The firm has flourished under Bain, cutting costs, improving profitability and growing externally. SigmaKalon's sales rose from €1.67bn in 2002 to €1.9bn last year and the company expects to break the €2bn barrier this year.

Last month, SigmaKalon CEO Pierre-Marie De Leener said that a secondary private equity sale or a partial sale to another financial buyer would be Bain's most likely exit strategy. De Leener was keen for the company's management to maintain the same level of independence it has enjoyed under its current ownership.

"We do not need an industry buyer to take us on," he said. "We are full of ideas and have a good business plan." Nevertheless, the opportunity to buy the second-largest coatings supplier to Europe, behind Akzo Nobel, will certainly draw attention from other industry players. Analysts have suggested PPG Industries, ICI and Sherwin-Williams could be potential bidders.

"Several parties are interested, including US coatings firms and private equity groups," Mark van der Geest, analyst at Amsterdam-based Rabo Securities, told ICIS Chemical Business. "In Europe, BASF is unlikely as it divested its decorative coatings business five years ago. Akzo and ICI would face anti-trust issues, but maybe they could circumvent these [through a partial acquisition]."

Van der Geest suggested that SigmaKalon would have an enterprise value of €2.1bn-2.5bn, or 1.1-1.3 times sales.

Industry observers have said the fragmented global paints and coatings market, with its many small, privately owned players, is ripe for consolidation, as slow growth, overcapacity and rising raw material costs are conspiring to squeeze margins.

Already this year, Akzo Nobel, armed with an €11bn war chest following the sale of its pharmaceutical and animal health division, has been linked to ICI and Valspar. And PPG Industries is said to be on the lookout for potential takeovers. ICI has more than once declared it is "ready, willing and able" to step into the acquisitions market.

SigmaKalon was created in 1999 from the merger of PetroFina's SigmaCoatings unit and Total's Kalon Group. The Dutch firm is active in marine and protective coatings, industrial coatings and decorative paints. The latter is its largest division, accounting for 72% of the firm's turnover. Bain is reported to have hired UBS and HSBC to oversee the sale.

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