Dulux paints maker AkzoNobel seeks premium dowry for its India ops. Attracts some heavyweight suitors.
Summary
- The Netherlands-based AkzoNobel is looking to sell its India business at a valuation of $2.5-3 billion. While the deal is in the early stages, some of India’s biggest conglomerates seem interested.
Europe’s largest paintmaker and owner of the Dulux brand, AkzoNobel NV, plans to exit its India business after seven decades of operations in the country amid competition heating up in the domestic market.
The Dutch firm is eyeing an all-cash deal valuing its listed Indian arm at $2.5-3 billion, which would make it the largest ever in India’s paints and coatings sector. JSW Group, Adani Group, Aditya Birla Group and Asian Paints Ltd have been approached for acquiring AkzoNobel India Ltd, said two persons familiar with the development, speaking on condition of anonymity.
AkzoNobel’s promoters have appointed Citigroup Global Markets as the investment banker to shortlist an appropriate buyer for AkzoNobel India Ltd, which currently has a market capitalization of $2.1 billion.
Amsterdam-headquartered AkzoNobel, which is also the world’s largest coatings company, has been doing business in India under various other names since 1954.
“The deal is likely to be agreed upon at around Rs25,000 crore. The buyers are keen to pay a premium to the market price," said one of the two persons mentioned above, adding that requests for proposal (RFPs) for the deal will be sent to the potential bidders in about a month.
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The promoters of AkzoNobel are demanding about a 50% premium to the current market value of the Indian business, this person said, adding that the potential buyers, as per initial discussions, are willing to fork out a 25-40% premium. This is because some of the business groups in the race to buy AkzoNobel India aspire to enter the home décor space and have large subsidiaries that extensively require paints and coatings.
Chief executive Gregoire Poux-Guillaume had said during a call with analysts last week that in markets where the paints segment was seeing a consolidation, the company was “happy to be a minority partner or exit all together".
Emails sent to Akzo Nobel NV, Akzo Nobel India, Aditya Birla Group, Adani Group, Asian Paints and JSW Group did not elicit any response. A Citigroup spokesperson declined to comment.
AkzoNobel India’s many avatars
Before AkzoNobel came to India, Brunner Mond & Co. (a part of ICI group in the UK) had changed its name to Imperial Chemical Industries (India) Ltd in 1929. Following the company’s diversification, a division named Indian Explosives Ltd was formed in 1954 (which was jointly promoted by ICI Plc and the Indian government).
In 1985, the company’s name was changed to IEL Ltd and in 1989 to ICI India Ltd. After the government reduced its holding to zero in 2003, the company’s name was changed to Akzo Nobel India Ltd in 2010.
AkzoNobel, with a capacity of over 250 million litres per annum, sells paints and coatings under brands Dulux, International, Sikkens and Interpon in India. The company recently launched an uber-luxury interior emulsion under the brand Dulux Velvet Touch Eterna. It also launched Interpon A3000 Powder coatings in India.
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AkzoNobel India has about 16% share in the premium paints market. Its promoters include Imperial Chemical Industries Ltd, with a 50.46% stakeholding, AkzoNobel Coatings International BV (24.3%), AkzoNobel Chemicals International BV, Partner BV, and AkzoNobel (C) Holdings BV.
Since AkzoNobel India is a listed entity, the takeover will entail an open offer for investors to buy an additional 26% stake or more in the company.
The heavyweight suitors
Some of the suitors are particularly excited about AkzoNobel’s penetration in India amid the rising demand in the housing and industrials space for paints in the backdrop of thriving retail and infrastructure activities, said the two persons mentioned earlier.
“AkzoNobel’s distribution strength across India is attractive. And in all those areas groups like Adani, Aditya Birla and JSW are actively engaged in real estate, cement, infrastructure and materials businesses," said the first person mentioned above. “Having an in-house paints business with a wide presence helps in back-end integration of the key business activities under these groups."
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While Adani group, which owns realty and cement businesses does not have any paints business, Aditya Birla group’s paints firm Birla Opus has six manufacturing plants with a total capacity of 1,332 million litres per annum. The company plans to operationalize some of its units in Karnataka, Maharashtra and West Bengal in 2024-25.
JSW Paints has two manufacturing units—an industrial coatings facility at Vasind, Maharashtra, and a decorative paints facility at Vijayanagar, Karnataka—with a combined capacity of 170,000 kilolitres per annum.
Asian Paints Ltd, with 53% market share, is India’s largest paints firm and already holds a 4.42% stake in AkzoNobel India.
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“As per the initial analysis, Adani group, Aditya Birla group, and JSW group have enough cash flows within the group needed to buy out AkzoNobel India," said the first person. “Asian Paints may also be keen but they may have to deal with the Competition Commission of India for any such large buyout, since Asian Paints is already a market leader."
For the Adani group and Aditya Birla group, the plan aligns well with their larger strategy to build the materials business since both of them are into real estate, housing, and cement businesses, said the first person.
The two groups are competing aggressively in the cement space with the Adani Group trying to acquire assets to match the market leader UltraTech Cement Ltd, an Aditya Birla Group company.