Akzo Nobel is getting closer to the top again

With annual sales of EUR 14.3 billion Akzo Nobel trails number one seed PPG (EUR 15.36 billion). The coatings business of BASF is ranked seventh with roughly EUR 3 billion. As the industrial coatings business accounts only for a smaller part of the sales value, Akzo Nobel is only stepping a bit closer to the top. There some questions about this deal I asked myself, and tried to find answers.

What is part of the deal?

The BASF business generated revenue of about EUR 300 million in 2015 and supplies products for a number of end uses, including coil, furniture foil and panel coatings, wind energy and general industry, and commercial transport. The deal would include technologies, patents, and trademarks, as well as securing supply to customers worldwide. Two manufacturing plants, one at Deeside, UK; and the other at Vanderbijlpark, South Africa, will transfer to AkzoNobel.

Why did BASF divest the business?

At the end of last year BASF Board Member Wayne T. Smith talked to news agencies dpa-AFX and dpa about the industrial coatings business. Even though the business is profitable, it is only a small part of the entire coatings business of BASF. The company intends to strengthen its focus on the core automotive original equipment manufacturing and automotive refinish coatings businesses, as well as the decorative paints business in Brazil.

What are the benefits for Akzo Nobel?

Akzo Nobel seeks to strengthen its position in the coil coatings market. This is the company’s official statement. Even though it is not explicitly mentioned, it is also an attempt to once again become the world largest coatings producer. Since last year PPG’s holding that title.

What are the effects of the transaction?

In most cases acquisitions come with some sort of incisions. If offices or production plants will merged or closed –due to the synergy effects – is currently not clear. If so, announcements on job cuts may be announced most likely.