SigmaKalon may attract bevy of buyers - sources

31 May 2007 21:56  [Source: ICIS news]

By Joseph Chang

NEW YORK (ICIS news)--Bain Capital has put Netherlands-based paints and coatings firm SigmaKalon on the selling block, and likely bidders include PPG Industries, ICI, Sherwin-Williams and perhaps Berkshire Hathaway, said sources on Thursday.

“Strategic interest would come from PPG and ICI and maybe Berkshire Hathaway,” said one investment banker. “Akzo Nobel probably couldn’t do it because of antitrust issues.”

Berkshire Hathaway, led by Warren Buffet, acquired paint company Benjamin Moore in 2001.

“SigmaKalon is the only coatings property out there of any size for sale, and PPG and Sherwin-Williams have a lot of money,” said another source in the financial community. “It’s too big for Valspar or RPM, but you’ll also have private equity firms sniffing around the deal as well.”

Bain has hired UBS and HSBC to run the sale process, note sources.

The sale of SigmaKalon, which had sales of more than €1.9bn ($2.6bn) in 2006, could fetch around 8-10 times its earnings before interest, taxes, depreciation and amortisation (EBITDA), according to sources. However, EBITDA figures for SigmaKalon were not disclosed.

Staple financing of around 7.5 times EBITDA was being offered by the banks, said one banker.

“I think there's a 7.5 times EBITDA staple from UBS, so the total sale price could be around 9 times EBITDA,” he said.

Staple financing is sometimes provided by the banks to help facilitate a deal. In staple financing, the banks lend the buyer of an asset a set amount of funds based on the cash flow of the asset - in this case, 7.5 times EBITDA.

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Author: Joseph Chang
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