Akzo Nobel sells North American paints unit to PPG
By ROBERT VAN DEN OEVER
Akzo Nobel, the Dutch paints and coatings supplier struggling with tough trading conditions in Europe, on Friday said it would sell its North American paints business to US rival PPG Industries for $1.05 billion.
Akzo Nobel, which is shedding the paints unit after four years of losses and restructuring, said it would use the $875 million disposal proceeds to reduce debt and invest in higher-growth markets.
The company wrote down the value of its paints assets by EUR2.48 billion euros ($3.25 billion) in October.
U.S. Deco, as the Akzo Nobel unit is known, has been hit hard by the slump in the US construction and housing market, struggling to compete with bigger US rivals, such as PPG and Cleveland, Oh.-based Sherwin-Williams Co.
Akzo Nobel originally acquired the business as part of its 2008 acquisition of UK chemicals company ICI. U.S. Deco had revenue of $1.5 billion in 2011, about 7% of Akzo Nobel's total.
U.S. Deco "lacks critical mass and reaching the level needed would require significant funds and management attention," which Akzo Nobel wasn't prepared to invest despite signs of a recovery of the US housing market, said CEO Ton Buechner. The company expects the division to break even at the operating level in 2012.
Fabian Smeets, an analyst at ING, said Akzo Nobel has sold U.S. Deco on the cheap, foregoing the restructured business's longer-term potential as demand for paint should improve with a recovering US housing sector.
But he suggested that Mr. Buechner had sent a strong signal to Akzo Nobel managers that he won't tolerate poor performance. Selling U.S. Deco shows there are "no sacred cows," Mr. Smeets said. "Underperforming units within Akzo Nobel should beware".
Mr. Buechner took the helm of Akzo Nobel in April this year. In early September, he took a temporary leave of absence for medical reasons. He made his first public appearance Friday since returning to work Dec. 7. Mr. Buechner is due to give a full strategic update for the group in February.
The transaction with PPG is expected to close in the first quarter of 2013.
Dow Jones Newswires
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