AkzoNobel May Sell Consumer Paints Business in India, Retain Industrial Coatings

Strategic Shift in AkzoNobel’s India Business

AkzoNobel N.V., Europe’s largest paintmaker, is reportedly considering selling its business-to-consumer (B2C) paints division in India while retaining its industrial coatings segment. This move comes as part of a strategic review launched last year to optimize its operations in the Indian market.

Potential Valuation and Bidders

• The company is expecting a valuation of $1.5-1.7 billion for its consumer paints business.
• If a full exit from India is pursued, the total deal size could increase to $2.2 billion.
• Three bidders—Pidilite Industries, JSW Paints, and Indigo Paints—have advanced to the second round of negotiations.
  • Pidilite is likely to bid solo.
  • JSW Paints is exploring a partnership with private equity firms Blackstone or TPG.
  • Indigo Paints is in talks with Advent International or Warburg Pincus for financial backing.

Challenges in Selling the Industrial Coatings Business

While AkzoNobel is currently inclined to retain its industrial coatings division, a sale of this segment would be more complex due to several factors:

• Intellectual property rights and long-term contracts with industrial clients, including the Indian Navy, complicate a potential sale.
• The coatings business requires specialized technical expertise and long-term tie-ups, making it less attractive for conventional bidders.

AkzoNobel India is publicly listed and has a market capitalization of $1.75 billion. However, if a full divestment is pursued, potential acquirers would need to navigate regulatory approvals and establish new industrial agreements, similar to how Asian Paints, Kansai Nerolac, and Nippon Paints operate their industrial coatings divisions through global partnerships.

Bidding Process and Timeline

• The bidding process requires potential buyers to submit offers specifying valuations for each segment.
• Due diligence will begin based on these bids and is expected to take approximately four to five months.
• AkzoNobel’s extensive distribution network of around 8,000 dealers is a key factor influencing the valuation.

Dutch Parent Seeks an All-Cash Deal

• AkzoNobel’s Dutch parent company is reportedly seeking an all-cash transaction rather than a share swap.
• Emails sent to AkzoNobel, its India unit, and the bidders have remained unanswered, and the details could not be independently verified.

Conclusion: A Major Reshaping of India’s Paint Industry

If the deal goes through, it will mark a significant shift in India’s competitive paint sector, where Asian Paints, Berger Paints, and Kansai Nerolac dominate. The sale of AkzoNobel’s consumer paints unit could pave the way for stronger competition among Indian and global players, potentially reshaping the industry landscape.

With foreign investments, strategic partnerships, and valuation considerations at play, the final outcome of this sale could have far-reaching implications for India’s paints and coatings market.