Big paint
Netherlands-based Akzo Nobel NV, the #1 manufacturer of paints and coatings worldwide announced that it will buy UK-based Imperial Chemical Industries Plc. (ICI). The deal is for $16 billion. It is part of a roll-up in the once very competitive industry.
ICI is the #5 maker of paints and coatings worldwide, and sells such brands as Dulux and Glidden paints. The move will make Akzo the #2 player in the US and China. It sells paint brands Crown and Sikkens.
In a side deal, Akzo will sell off ICI's National Starch division, which accounts for 40% of ICI revenue, to Germany-based Henkel KGaA, a manufacturer of detergent and the owner of US soap brand Dial and Right Guard deodorant.
The Wall Street Journal ("Akzo Nobel Agrees to Acquire Britain's ICI for $16.18 Billion", 8/13/06) notes that the Akzo-Henkel deal has precedents:
The deal would mark a new willingness by big companies to join forces to buy a competitor, breaking up the acquired company among the buyers. A similar breakup plan is being attempted by a consortium of three European banks in a contested nearly $100 billion takeover bid for ABN Amro Holding NV of the Netherlands. If that deal is successful, it would be the first breakup bid of its kind in the banking industry.
National Starch makes adhesives and electronics-related materials. That deal is worth around $5.4 billion. The ICI purchase was enabled by Akzo's sale of pharmaceutical division Organon to US-based Schering-Plough for $14.4 billion. Similarly, ICI sold off its Quest flavorings division in 2006 for $2.3 billion.
Meanwhile, the #2 paint player (#1 in the US) PPG Industries Inc. (formerly Pittsburgh Paint) is not standing idle. It recently announced it would buy #8, Dutch-based SigmaKalon Group for 2around $3 billion. SigmaKalon is owned by private equity fund Bain Capital, which bought it in 2003 for $1 billion.
The demise of ICI, once one the UK's signature firms, is just another step in the internationalization of what were once key landmark of national industrial prowess. ICI, founded in 1926 by a four-company merger, invented the term "plastics' and was the originator of polythene. The WSJ article notes that yet another UK industrial firm has been swallowed up:
An acquisition of ICI, an 86-year-old London-based industrial company, would be the latest in a string of purchases of major British companies by foreigners. The trend is the result of the U.K.'s continued transformation from its industrial roots to a more services-oriented economy. It is also the effect of Britain's policy of economic openness.
