JSW poised to acquire Akzo Nobel India for $1.1 billion
JSW
Paints is set to take over
Akzo Nobel India
, valuing parent
Akzo Nobel
NV's 74.76% stake at about Rs 9,000 crore ($1.1 billion), said people aware of the matter. This translates to a Rs 12,000-12,200 crore value for the Indian unit of the Dutch multinational, a 25% discount to the current market price, they said.
The deal will take the acquirer to fourth position in the country's decorative paints market and number 2 in the industrial segment, giving it much-needed heft. Akzo Nobel India's market capitalisation is at Rs 16,380 crore, with the stock having closed at Rs 3,582 on Friday. The share has bucked industry trends, surging 40% in the past year in anticipation of a sale. Announcement of the transaction will trigger an open offer for another 26% of the company.
This is based on the regulatory formula of the share price's weighted average in the past 60 days, after adjusting for Rs 700 crore cash on the books that will be given to shareholders as dividends.
JSW won't exceed the 75% threshold. In the event that the entire open offer quota is tendered by public shareholders, it will buy that much less from Akzo Nobel NV. In that scenario, the Dutch parent won't exit its entire holding in one go and may gradually pare the stake through open market sales. It's estimated that JSW may end up spending Rs 9,000-9,500 crore on the transaction.
The two sides are working toward finalising the share purchase agreement by mid-June, within the 30-day exclusivity period, said the people cited. ET reported on May 15 that they had entered into an exclusive agreement to hold negotiations as JSW trumped a competing bid by a consortium of Advent International and Indigo Paints. The JSW promoter family —led by group chairman Sajjan Jindal —is planning to put in Rs 3,000 crore as equity for the buyout, said the people cited. Another Rs 3,000 crore is being financed through banks such as Deutsche Bank, MUFG and Axis, among others.
ET has earlier reported the group to be in discussions with the credit funds of
KKR
, Ares Capital and Goldman Sachs, among others, for funding. Interestingly, the plan is to keep privately owned JSW Paints and Akzo India as two separate businesses and not initiate a reverse merger between the two, according to the people familiar with the plan.
Akzo and JSW Group declined to comment. Citi and Morgan Stanley are advisors to the deal.
UNHAPPY HUE
After announcing its decision to review business operations in the Indian subcontinent in October last year, Akzo India, in February, hived off and agreed to sell its powder coatings business— the unit's most profitable stream that contributes close to 12-14% of sales—to its Dutch parent. This had taken some of the sheen off the deal for contenders. The intense competition in the Indian paints industry and the resultant margin squeeze has also led to valuations getting impacted, according to analysts.
FY25 was one of the worst years for the country's
paint industry
in nearly three decades, with business contracting. This came amid increased competition with the entry of the Aditya Birla Group's Birla Opus in February last year. At an industry level, demand fell 4-5% in FY25.
Akzo, like most in the industry, has been bracing for sectoral headwinds. The company has about 7% market share in India and is one of the most profitable in the segment, with an annual production capacity of 250 million litres, focused on high-end decorative paints with its Dulux brand. It experienced low single-digit growth in value in the December quarter while profit was down 5%, partly due to a special dividend issued in the previous year. The automotive and vehicle refinish segments faced challenges, hitting overall performance. Akzo, one of the largest paint companies in the world, has been slashing jobs and production, intensifying concerns about the resilience of European industry, as the continent struggles with rising energy costs following Russia's invasion of Ukraine.
JSW is looking for significant gains. It turned profitable at an operating level for the first time in FY24, with an operating margin of 3%. An Akzo buy will inch it closer to third-placed Kansai Nerolac in the decorative segment.
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