JSW Paints Leads the Race for Akzo Nobel Prize
HighlightsJSW Paints has signed an exclusivity agreement to acquire Akzo Nobel India, surpassing the competing bid from a consortium of Advent International and Indigo Paints. If the acquisition is successful, JSW Paints will rise to the fourth position in the Indian decorative paints market and enhance its presence in the industrial paints sector. The acquisition deal, valued at approximately ₹11,854.63 crore ($1.39 billion), will trigger an open offer and is expected to help JSW Paints approach the ₹10,000 crore revenue mark, making it a candidate for a possible Initial Public Offering.
JSW Paints
has emerged as the frontrunner to acquire
Akzo Nobel India
, trumping the only competing bid from a consortium of Advent International and Indigo Paints, said people aware of the development. Ending weeks of intense negotiations, the two have signed an exclusivity agreement for negotiations to finalise terms and documentation for a share purchase agreement before making a formal announcement.
If successful, this will catapult JSW to fourth position in India from lower down in the pecking order, inching closer to third-placed Kansai Nerolac in the decorative segment and putting it in No 2 slot in
industrial paints
space.
It also will help JSW Paints inch closer to the `10,000 crore revenue mark, putting it in line for a possible
IPO
.
Decorative paints
account for 75 per cent of the total demand in the country, led by repainting and new construction. Asian Paints leads the segment, followed by Berger and Kansai Nerolac.
Both bidders for Akzo Nobel India had submitted binding offers late last month, ET was first to report April 24.
Deal may Trigger Open Offer | page 12
Hectic deliberations have been underway in the past few weeks, starting at a significant discount to the current
market value
, keeping in mind the fast-changing competitive landscape of the Indian paints business. The bid-ask gap is said to have shrunk significantly over this period.
Akzo Nobel India's current market value is at ₹15,857.14 crore, the stock having closed Thursday at ₹3,482, down 25 per cent from its 52-week high of ₹4,649 on October 9. To be sure, it surged about 36 per cent in the past 12 months in anticipation of a sale.
Parent AkzoNobel NV holds a 74.76 per cent stake as promoter and JSW's offer will trigger an open offer. JSW's offer is said to be at a 5-8 per cent discount to the market price, valuing the promoter stake at ₹11,854.63 crore ($1.39 billion). Privately held JSW Paints is expected to reverse merge with the listed Akzo Nobel India, according to the people cited. It's not yet clear if AkzoNobel will retain a small stake in the combined business. Citi and Morgan Stanley are advisors to the transaction.
Sri Lanka operations
For the moment, JSW is looking to buy the India operations with an understanding that it will eventually take over operations in Sri Lanka, where Akzo already has a local joint venture partner.
Sajjan Jindal-led JSW has been in discussions with several global banks and financial institutions including Standard Chartered Bank, MUFG and Barclays for
acquisition
funding, said the people cited. It's also said to be in talks with Ares Capital, KKR, Goldman Sachs and Apollo Global Management for ₹4,000-4,500 crore of structured financing. Apollo is already an investor in the group's cement business. The financing consortium is yet to be finalised.
The promoters, the Sajjan Jindal family, are expected to infuse ₹2,500-₹3,000 crore as equity. The deal size will depend on the success of the open offer.
JSW was not available for comment. AkzoNobel NV declined to comment on market speculation. Emails sent to Ares Capital and Goldman Sachs didn't elicit a response till press time. KKR declined to comment.
AkzoNobel had announced plans to review its business operations in the Indian subcontinent in October 2024. In February, Akzo Nobel India hived off and agreed to sell its powder coatings business — its most profitable stream that contributes 12-14 per cent of sales — to its Dutch parents. That took the shine off the deal for several potential suitors, industry executives said.
JSW Paints hasn't been able to break into the decorative top three since it was set up six years ago. On the other hand, newcomer Birla Opus, from Grasim Industries, has managed to gain a 3-4 per cent market share in Q3 alone, said industry executives. Given that Akzo Nobel India's Dulux Paints is present in the luxury and uber-luxury category and in urban markets, a deal will give JSW Paints significant heft in the market.
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