Three to four groups have advanced to the second round of the bidding process for AkzoNobel’s specialty chemicals unit, a spokesperson for the Netherlands-headquartered paints and coatings major said on 7 March.
Private equity and industrial firms are understood to be among the prospective bidders for the unit that made it past the first-round cut-off that ended just before Christmas, the spokesperson said.
AkzoNobel is running the separation of the unit on a dual track process, with a carve-out through an initial public offering (IPO) under consideration alongside the sales process.
Analysts project that the unit would sell for at least €9.5bn, based in part on the level of interest it has attracted so far.
PRIVATE EQUITY BIDDERS
According to an industry source with knowledge of the situation, private equity firms Advent International and Bain Capital are understood to be involved with the process and are in discussions with AkzoNobel.
Germany-based specialty chemicals firm LANXESS is also considering a bid alongside private equity firm Apollo, according to media reports, while Carlyle is also reportedly involved as a standalone investor, and local firm HAL Investments has also been mooted as a bidder.
However, the current number of bidding groups is no higher than four, according to the spokesperson.
Advent, LANXESS and Carlyle declined to comment, while Bain, HAL and Apollo could not be reached at the time of publication.
AkzoNobel has told investors that it will update the market when a decision has been made on whether it plans to pursue a sale or listing option for the unit in due course, but there is no set deadline for a decision before 19 April, 12 months since the divestment decision was announced.
HAL Investment is the only Netherlands-based entity reported to be considering a bid on the AkzoNobel, which could be a factor in light of the firm’s “seeming priority to remain an independent operating entity with Dutch headquarters”, according to a Credit Suisse investor note released on 7 February.
Credit Suisse was commenting on the core specialties business, but the final route for the separation of specialties will require shareholder approval, and the desire to remain a Dutch company was a factor in fighting off a takeover bid by US-based firm PPG last year.
Most of the private equity firms involved have form in the chemicals sector. Carlyle acquired Atotech, the specialty chemicals business of France-based oil and gas firm Total, for $3.2bn last year, and is the former owner of Axalta, the US coatings firm AkzoNobel pursued a merger of equals with last year.
Apollo was involved in the turnaround of US petrochemicals firm LyondellBasell in 2010 and reportedly has LANXESS as an experienced industry partner.
Advent is the former owner of oxo-alcohols group Oxea.
Credit Suisse on 7 February upgraded its outlook for the company from neutral to outperform, upping its 12-month share price expectations to €78.50 apiece to €82.50, driven by expectations that the company will either pursue or be the subject of large-scale mergers and acquisitions activity after the specialties carve-out.
Analysts at the bank project that the most probable outcome for the company post-spin off is that it will pursue merger and acquisitions (M&A) opportunities on the scale of the merger it was pursuing with Axalta before Japan-based firm Nippon Paints emerged with a takeover bid.
Nippon has since walked away from a deal, leaving Axalta as a prospect for other acquirer.
PPG ROUND TWO?
Credit Suisse pegged renewed engagement by PPG or another prospective suitor as another likely outcome, with strong odds of shareholder approval if so.
PPG’s cool down period after its takeover attempt failed ended in November 2017, meaning the US rival is free to re-engage if its management decides to.
The strongest prospect for AkzoNobel shareholders would essentially be the PPG offer that AkzoNobel shot down in 2017, Credit Suisse said, with an offer at the previously-rejected bid level offering yields of €90/share.
“This appears dependent upon a change in composition of the Akzo board, potentially in conjunction with additional shareholder activism,” the bank said.
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