PPG Offers To Buy Dutch Paint Maker For $3 Billion

Pittsburgh-based PPG Industries has offered to buy the Dutch paint maker SigmaKalon Group from private equity firm Bain Capital for $3 billion including assumed debt.

PPG says Bain has granted it a period of exclusivity and that Bain intends to respond to the offer after consulting with employee representative bodies. Should Bain accept the offer, it stands to make a healthy profit. Bain acquired SigmaKalon in 2003 from French oil and petrochemical firm Total for about $1 billion.

SigmaKalon is a producer of architectural, marine, and industrial maintenance coatings with a significant presence in Europe and a growing presence in Asia and Africa. It had sales of about $2.8 billion in 2006 and employs 10,000 people. According to press reports, a number of other firms have placed bids to acquire SigmaKalon. Among them are U.S. paint maker Sherwin-Williams and three private equity firms: PAI Partners, BC Partners, and Warburg Pincus.

PPG CEO Charles E. Bunch says a deal for SigmaKalon "would give us an excellent footprint in the European architectural coatings segment, where today we have very nominal participation. This acquisition would give us a more balanced coatings business in Europe, approximately doubling our European sales, and expand our global coatings portfolio by more than 40%."

In a note to clients, analyst Frank J. Mitsch of BB&T Capital Markets says PPG is unlikely to face the regulatory challenges that potential European acquirers such as Akzo Nobel and ICI might face. Should PPG succeed in acquiring SigmaKalon, Mitsch says, it would become the world's leading coatings producer.

Shortly after it disclosed the pending deal for SigmaKalon, PPG said it had reached an agreement to acquire architectural paint maker Barloworld Coatings Australia for an undisclosed price. The business employs 750 people and operates 85 company-owned stores throughout Australia. A year ago, government antitrust authorities blocked Barloworld's deal to buy competing Australian paint maker Wattyl.