Coatings business for sale a better fit for AkzoNobel than BASF – analyst
Tom Brown
11-Feb-2016
LONDON (ICIS)–The
industrial coatings business units that AkzoNobel is in talks
to acquire from BASF would fit into the Netherlands-based
company’s portfolio more comfortably than it does for its
current owner, an analyst said on Thursday.
AkzoNobel is in talks to acquire BASF’s international coil
coatings operations, alongside foil and paint, wind and
general industry coatings, while BASF would retain the
automotive and transport parts of its coatings
division.
“The rationale behind [the potential sale] is that BASF
doesn’t seem to feel that it has critical mass in the
business. It claims to be number three in Europe, but is way
off from [that] when it comes to global production of coil
coatings,” said Oliver Schwarz, chemicals equity analyst at
Warburg Research in Germany.
According to sources familiar with the situation, around five
players are in talks for the potential acquisition of the
business, with US firm PPG also said to be looking into a
deal.
Part of BASF’s functional materials and solutions arm,
coatings generated revenues of around €3bn in 2014, with the
bulk of sales generated from the automotive sector.
Coil coatings generates sales of around €500m, according to
sources, with earnings before interest, taxes, depreciation
and amortisation (EBITDA) of between 10-12% and 10-14% of
that total, depending on the year. It is understood that the
unit could be expected to raise around €500m in a sale.
“It’s part of the coatings business but it has not that many
ties to the key automotive business of BASF’s franchise,”
Schwarz noted.
AkzoNobel has stated that that it could pursue bolt-on
acquisitions to supplement its strategy of organic growth
after cutting debt and strengthening its balance sheet.
A divestment would not be a drastic move for BASF, but would
be in keeping with AkzoNobel’s strategy, according to
Bernstein Research chief chemical analyst Jeremy
Redenius.
“It’s a really small business at BASF, [and would be] a
bolt-on acquisition to strengthen the position of industrial
coatings,” he said.
AkzoNobel derives almost half its revenues from industrial
coatings, particularly marine and construction coatings, and
the coil business would fit in with its existing operations
in the sector, according to Schwarz.
“Coil coatings would fit perfectly with the coil coatings
activities AkzoNobel already has, because that is very much
attached to the construction coatings that they offer,” he
said.
PPG, which acquired AkzoNobel’s North American
decorative paints business for $1.05bn in late 2012, did not
immediately responded to requests for comment.
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