Several buyout firms are preparing to participate in the roughly US$4bn auction for the DuPont unit that makes automotive finishes and industrial coatings, people familiar with the matter have said.
DuPont is reviewing the sale of its performance coatings business, sources previously told Reuters, as the company reconsiders its focus after having grown from a maker of explosive black powder into a global materials company active in the chemical, food and agricultural sectors.
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Major private equity firms have expressed early interest in the deal, according to the latest sources. KKR & Co, Bain Capital, TPG Capital and Onex Corp are among those who have made preliminary inquiries about the sale and talked to banks about financing a potential deal, these people told Reuters.
Wilmington, Delaware-based DuPont, advised by Credit Suisse Group, plans to launch the process in January by sending out financial information of the unit to interested parties, the sources said. Initial bids for the business, which has an estimated enterprise value of around $4b, are expected in February, they added.
The potential sale of the unit, which mainly sells to Maaco and other auto paint refinishers, comes as DuPont looks to focus on other growth areas such as food and nutrition. Ford and General Motors Co are also key customers.
The world’s largest global producer of titanium dioxide, a white pigment that is used to make paint and other consumer goods, cut its full-year profit outlook on Friday as several of its markets weakened.
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By GlobalDataThe report noted that the coatings business is very sensitive to economic trends. Its sales slumped in 2008 and 2009 as carmakers scaled back operations and the strong recovery it saw in 2010 is now in doubt due to market uncertainty.
“There is tremendous amount of overhead at corporate level. This has been an unloved business for DuPont and there is a lot you can do with it,” an anonmous private equity source told the news agency.
DuPont has followed a strategy of “delivering earnings and cash growth through cost and working capital productivity while making only very selective growth investments” in performance coatings, the company said in its presentations.
While private equity firms have shown strong early interest in the business, it remains yet to be seen if potential trade buyers such as PPG Industries Inc and AkzoNobel NZ will also participate in the auction, the report noted.
