AkzoNobel is all set to sell of its specialty chemicals segment to Carlyle Group, a U.S. private equity firm. The deal will be for $12.5 billion in order to transform the company into a focused supplier of paints and coatings.

United States: AkzoNobel will be selling its specialty chemicals business to U.S. private equity firm Carlyle Group for $12.6 billion to transform the operations and become a focused supplier of paints and coatings. The net proceeds of the deal are expected to be around 7.5 billion euros with the bulk going to shareholders.

Akzo announced plans to sell the business, which accounts for a third of its sales and profit last year as it looked to evade a takeover from rival PPG Industries. The decision was revealed, a year after the manufacturer first rejected a $29 billion takeover attempt by rival PPG Industries Inc., a move that lead the Chief Executive Officer to break up the company.

The company considered private sale as well as a separate stock listing for the chemicals division, finally concluding that a sale to Carlyle was the best for all employees, shareholders and customers. Carlyle’s bid beat proposals by rivals including a joint bid of Advent International Corp. and Bain Capital LP, and Apollo Global.

The specialty-chemicals business is AkzoNobel’s most profitable and the division will generate around 40 percent of the company’s adjusted operating income. The unit also has a strong position in the commodity chemical chlorine market and products like ingredients used in personal-care.

The company informed that the sale values the unit at 10.1 billion euros including net debt. The company expects a cash payment of 8.9 billion euros. After deduction of expenses and some liabilities, the net proceeds are expected to be around 7.5 billion euros and the clear majority will be distributed to shareholders.

JPMorgan, HSBC, and Lazard advised the Dutch company on the sale, while Evercore and Valence worked with Carlyle on its proposal. Barclays, HSBC, and JPMorgan are leading the debt financing backing the transaction

The Chief Executive of Akzo, in an interview said that Carlyle has substantial experience in the chemicals industry and a good track record when it comes to health, safety, innovation and sustainability.

According to TechSci Research, AkzoNobel’s decision to sell its specialty chemicals to Carlyle group are in line with the company’s strategy to transform itself into a focused supplier of paints and coatings. This step is expected to have a positive impact on the paints & coatings industry, as the market will witness robust growth. The paints & coatings industry is expected to show stable growth in the coming years due to increasing urbanization and industrialization. Moreover, robust development in infrastructure and automotive sector, especially in major developing countries, is also boosting demand for paints & coatings. In addition, with rising environment concerns, there is a growing demand being witnessed for paints & coatings with low volatile organic compounds, which is also positively influencing the demand scenario in the global paints & coatings market.

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