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Specialty Chemicals

AkzoNobel’s former chemical business relaunches as Nouryon

Newly independent firm aims to cut costs and increase its manufacturing footprint

by Alex Scott
October 10, 2018 | APPEARED IN VOLUME 96, ISSUE 41

09641-buscon1-nouryon.jpg
Credit: Nouryon
Nouryon has launched as an independent chemicals firm with a new brand.

AkzoNobel’s former chemicals business has become an independent company and been renamed Nouryon under new venture capital owners the Carlyle Group, which acquired it for $11.6 billion. The new name is a nod to Jan Nourij, a cofounder of a 19th century Dutch milling firm, which became a founding company of AkzoNobel.

Nouryon makes products including chlorine, caustic soda, polymer additives, surfactants, and water-treatment chemicals. The business recorded sales in 2017 of $6.2 billion and pretax profits of $850 million. The firm’s headquarters are in Amsterdam.

Nouryon’s new CEO, Charles W. Shaver, was until recently CEO of U.S. coatings firm Axalta. He says he has no immediate plans to make major changes at Nouryon. The aim is to retain all 21 of the firm’s product lines and grow annual profits and sales by 4%–5%, up from the current level of about 2%. This growth would occur through a combination of debottlenecking manufacturing plants, improving productivity, and taking out costs, he says. “Carlyle didn’t buy this business to see it stay flat,” Shaver says.

Carlyle didn’t buy this business to see it stay flat.”
Charles W. Shaver, CEO, Nouryon

Under its new tag line, “Ready to unleash our full potential,” Shaver says the business is already on a path to growth, partly because some large capacity-expansion projects are nearing completion. The company will continue to invest 5–6% of its revenue, or $290 million to $340 million annually, to expand production.

“We have assets they [major chemical firms] would love, but we just want to get on growing the business,” Shaver says.

Annualized cost savings from ongoing programs across the company are currently running at about $80 million. Nouryon is looking to increase these savings through improvements in operational efficiency and by investing in automation.

R&D investment will continue to run at around $115 million per year. About 700 of the firm’s 10,000 employees are involved in R&D. Nouryon expects staffing levels to remain steady, although the company could make bolt-on acquisitions costing between about $60 million and $80 million if they are a strategic fit, the firm says.

Carlyle typically looks to exit its investments after three to five years with at least a 20% return on their equity, according to Shaver. Given Nouryon’s large size, the most likely exit path would be to sell the business on the financial markets, he says. Carlyle will likely take a hands-off approach to Nouryon despite taking eight of the 10 seats on Nouryon’s executive board, Shaver says.

AkzoNobel will distribute $7.5 billion from its net proceeds of $8.6 billion from the divestment to shareholders. Remaining proceeds will be used to repay debt, finance costs associated with Nouryon’s transformation, and conduct bolt-on acquisitions, says AkzoNobel’s CEO Thierry Vanlancker. AkzoNobel decided in 2017 to sell its chemicals business to raise funds for shareholders rather than allow itself to be taken over by U.S. paints rival PPG Industries.

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