Paint maker Akzo Nobel has initiated a second round of discussion with potential bidders. The shortlist comprises at least three decorative paint companies including JSW Paints and Pidilite, and one private equity firm.
Discussions are on to invite binding bids from them. Merchant bankers have reached out to some of these bidders to discuss the “premium” associated with the ‘Dulux’ brand of decorative paints, while bids are being sought in ₹20,000 crore-range, sources in the know told businessline.
Citi Group is the merchant banker for Akzo.
business review
Akzo Nobel NV, the Amsterdam-based paint-maker and amongst the largest globally, has put its South Asia business, including India unit, AkzoNobel India, under ‘business review’, that primarily includes sale. The parent paint-maker has a 75 per cent stake in India businesses.
Akzo India is the fourth largest paint-maker here after Asian Paints, Berger Paints and Kansai Nerolac. Asian and Berger together enjoy nearly 75 per cent market share.
“The second round of discussions have begun, and the company (global headquarters) has reached out to some of the bidders. Merchant bankers of Akzo are in touch with three paint makers in India, and one PE firm; valuations are under-discussion,” the source said.
Amongst major companies JSW Paints and Pidilite continue to be in the fray, while Indigo Paints too is seen as a ‘serious contender.’ Some of these companies are in talks with PE firms, including multiple ones, to fund the acquisition.
For instance, JSW partnered with TPG for non-binding bids, but has “kept all options open” and is talking to other PEs before placing binding bids (since valuations are high). JSW Paints did not respond to mails.
Asian, Berger and Birla have opted out of the race at present.
A second person in the know said Akzo top brass has over the last few weeks opened up their financials for scrutiny, while evaluation of the powder coating business – which will be taken over from the India business by another subsidiary of the parent company – is underway and expected to be completed by the end of this month. Post this, a re-evaluation of market cap will be considered.
Plant visits are expected soon.
Akzo and Pidilite did not respond to mails by businessline, while Hemant Jalan, MD, Indigo Paints, did not take calls.
High Valuation
Merchant bankers are aiming at a ₹17,000-20,000 crore valuation. But the general sentiment is that the valuation is high.
AkzoNobel India’s current market cap is around ₹15,000 crore.
“So the bankers are seeking a 1.5x of the average market cap,” a source said.
Some bidders said the average market cap for Akzo India has been hovering at ₹10,000 crore, with the last four years average being around ₹8,000 crore, till share prices shot up from July 2024 onwards.
While there is stability in the current market cap range, bidders say if Akzo’s powder coating business is taken out as a separate entity, then there will be a 10-12 per cent hit in market cap.
“So average market cap as valuation, plus 10–15 per cent market control premium less another 10-15 per cent of the powder coating business…. which again works out to a max of ₹15,000–16,000 crore plus – minus 10 per cent is seen as the right price by some of the bidders initially,” said a source who had participated in the meetings.
Any take-over bid will trigger an open offer too, the source said.
