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Akzo Buys-Out Plascon JV, Cobalt Partners with Rhodia, Nordson Expands

Hello and welcome to your late week international coatings industry update, brought to you by SpecialChem. Just as green has become the new black in fashion, partnering between corporations has become the new capital in a capital-poor world. In the last year or two, joint ventures and coop agreements have skyrocketed, and it will cause us to redefine the industry and the way it operates. We have some examples in this issue.

AkzoNobel Powder Coatings announced that it is acquiring 100 percent of its Powder Coatings joint venture in South Africa. Financial details were not disclosed. After more than 40 years of a mutually beneficial relationship, Akzo Nobel Powder Coatings South Africa (Pty) Ltd and Freeworld Coatings (through its Plascon subsidiary) concluded participation in the original joint venture.

The deal comes on the back of Freeworld Coatings' acquisition of Kansai, and underlines AkzoNobel's commitment to developing business in the African continent. AB Ghosh, AkzoNobel Powder Coatings Managing Director commented: "This acquisition highlights our confidence in this important market, and South Africa is strategically well located for us to continue and to expand on the excellent work we are doing in Africa."

Cobalt Technologies and Rhodia, a member of the Solvay Group, announced that they will begin joint development and operation of a biobutanol demonstration facility in Brazil. This is one more step by the two companies toward the construction of commercial-scale biorefineries using Cobalt's technology to convert Brazilian bagasse and other local non-food feedstock into bio n-butanol in Latin America.

"This agreement puts us on a clear path towards commercialization, which will result in the development of the first commercial-scale biorefinery using bagasse as a feedstock for the production of biobutanol," said Bob Mayer, CEO of Cobalt Technologies. "We are very pleased to be working with Rhodia.

Nordson Corporation announced the acquisition of Plymouth, Michigan, USA based Sealant Equipment and Engineering, Inc., a designer and manufacturer of metering, mixing and dispensing equipment and valves which apply 1-part, 2-part and 3-part adhesive, sealant and lubricating materials. Terms of the transaction were not disclosed.

The acquired business had sales of $18 million for the twelve months ended June 30, 2012, employs 60 people, and will operate as part of Nordson's Industrial Coating Systems segment. "Sealant Equipment & Engineering provides Nordson with a broader presence in the cold materials equipment market and focuses on a wide variety of general industry applications including aerospace and transportation, building and construction, medical, alternative energy and many others," said Nordson president and CEO Michael Hilton.

First we start out with the continuing saga of DuPont Performance Coatings. The financial industry is abuzz with activity, rumors and probably downright fabrications (they are bankers, after all.) The latest rumor is that there is a front-runner in terms of the bidding. Keep in mind, this could be a colossal load of crap, but it is fascinating, to be sure.

Rumor is that private equity firm Carlyle Group LP has emerged as the front runner to buy DuPont's car paint business after rival bidder Apollo Global Management LLC declined to increase its offer, according to three people familiar with the matter.

Carlyle made the highest bid for the DuPont unit, the people said. The sale may fetch more than $4.5 billion for DuPont, according to two of the people. While Apollo still remains in the mix, the buyout firm has told bankers it does not plan to raise its offer, leaving Carlyle as the most likely buyer, they said.

KKR & Co LP and Onex Corp, which had teamed up to submit a final offer for the DuPont unit, have already dropped out of the race, according to the people familiar with the matter.

As is usual, Carlyle, DuPont, Apollo, KKR and Onex remain officially mum on the subject of the acquisition, but the buzz is getting a little too loud to ignore completely, hence its inclusion here. Allegedly, DuPont received final bids on July 20 from three groups - Carlyle, Apollo and KKR teamed up with Onex.

Another private equity group that had been previously working on a potential deal - a consortium of Blackstone Group LP and Bain Capital LLC - was reportedly absent from the bidding at that time.

Reports are that Carlyle, which may still team with another private-equity firm on the buyout, is offering about eight times earnings before interest, depreciation, taxes and amortization, which is a bit higher than DuPont had been expecting.

If you look at Carlyle and filter it through the way these buyout companies actually operate some of this stuff starts to make some sense. Carlyle, which is known for its Washington, DC political ties, announced late last month it had joined with BC Partners in a $3.5 billion deal to buy industrial company Hamilton Sundstrand from United Technologies. They would be two of the year's biggest buyouts.

As of December 31, the firm had spent only 63% of the money from its $13.7 billion 2007 North American fund, according to a CalPERS pension website. Since modern buyout firms don't start raising new funds until they have invested about 75% or more of their prior vehicles. If they didn't do this, present investors would wonder why they need to invest new money, and pay more management fees.

But this year Carlyle is raising a new $10 billion fund; it reportedly has lowered its fees on its new fund, and already raised $2 billion. So Carlyle is carb-loading like a marathoner, acting like their NA Fund is already spent. Maybe it is, who knows?

In lead paint news, Baltimore's public housing agency announced Monday it has paid $3.7 million to a former public housing resident who suffered lead-paint poisoning as a young child in the 1980s.

The insurance payment to plaintiff Markeath Justice, now 29, marks the biggest step by the Housing Authority of Baltimore City to satisfy millions of dollars in lead-paint judgments that have gone unpaid in recent years. We reported last winter that the shear financial weight of those settlements could conceivably thank the entire city of Baltimore.

"This has been a long, hard road to say the least, and we are glad to find some level of resolution for what this plaintiff has suffered," Housing Commissioner Paul Graziano said in a statement. "HABC will continue to work hard to resolve lead paint judgments in a fair and responsible way while protecting public funds needed for the thousands of vulnerable low-income housing families."

The authority's inability or unwillingness to pay most of the judgments has generated sharp rebukes from some lawmakers and become a political headache for Mayor Stephanie Rawlings-Blake, who has pledged to work toward a resolution.

HABC says it has now paid $4.6 million to satisfy, partly or fully, four lead-paint judgments. The payout announced Monday does not cover the entire $5.75 million judgment awarded to Justice, who now lives in New Jersey and works at a shoe store, according to his lawyer. Agency spokeswoman Cheron Porter called it an "interim" payment and said officials were seeking more.

In addition to the remaining $2.1 million still owed Justice, $2.5 million in interest has accumulated since the jury's award in 2008, said his attorney, Brian S. Brown.

"I'm gratified that one client was able to obtain a portion of the verdict which was obtained on his behalf in court," Brown said. "On the other hand, I'm extremely disappointed and frustrated that the housing authority is not living up to its agreed-upon obligation to pay not only this judgment but the consent judgments that are still outstanding."

Brown represents five other clients owed between $250,000 and $500,000 apiece under consent judgments, in which the housing authority agreed to a dollar figure but did not pay it.

All told, eight court-ordered judgments against the housing authority remain unpaid, with two under appeal. The total dollar figure for the eight exceeds $3.5 million, not counting what is owed Justice.

In addition, the housing authority faces more than 200 pending claims that it says could carry a potential cost of $900 million, a figure that plaintiffs' lawyers call an extreme exaggeration.

If you remember in January, the housing authority scored a legal win when the Court of Special Appeals, the state's second-highest court, overturned a $2.6 million jury award to a brother and sister who contend they were poisoned by lead in the early 1990s.

Brown said the availability of insurance money in the Justice case contradicts the housing authority's claim that it could not obtain insurance coverage for lead-paint liability. The agency let its coverage lapse in the mid-1990s, and it has no insurance for the other unpaid judgments. Why, you ask?

In detailing the payout for Justice, the housing authority said it had a general liability insurance policy with Integrity Insurance Co. from 1981 through 1985. The policy covered lead-paint claims for exposure that occurred in that time period. But in 1987, a New Jersey court declared Integrity insolvent, according to the housing authority. "For several years, HABC aggressively pursued a claim against Integrity Insurance to honor its policy coverage," the agency said in its news release. "We are seeking additional funds from a final distribution by the liquidator," Porter said.

Although numerous lead-paint lawsuits were filed in the last several years, Graziano, city housing commissioner since 2000, said they involve events that predate Maryland's lead-poisoning-prevention law, which took effect in 1996. The housing authority said it has fully complied with the law and provides lead-safe housing.

Moving right along to more pleasant subjects, it's not just city governments in the USA that are broke, so, apparently is the education system. Kids in many schools must pay to participate in school sports and take subjects that should be mandatory, like art. How is this good news, you ask? Well it isn't, but we can look at the Chinese government and a paint company to find our way around this problem.

After collaborating with the China Youth Development Foundation (CYDF) to kick off the "Color, Way of Love" art teacher training project one month ago, Nippon Paint dispatched a handful of people to participant in an event.

Six college volunteer art teachers have gone to a primary school located in Pingguo village in the Guangxi Zhuang Autonomous Region to help the school with art education for three days from July 28 to 31.

The volunteers were selected from hundreds of art school students who wanted to partake in the project. Since it is their first time joining an art project that Nippon Paint organized, all of them embraced the opportunity.

They hope they can truly offer help with the skills they have to those children in rural and remote areas of China.

Nippon Paint also provided art supplies to the children, on top of giving them their specially designed textbooks.

It might have only been three days, but students already consider their temporary teachers as their friends. Volunteer teachers hope that the works created by these children can be shared, so that people will be able to appreciate children's imaginations.

In order to beautify the outside look of primary schools and inspire children to dream, Nippon Paint, together with Dupont, initiated the "Color, Way of Love" project in 2009. They also offer funds to build art classrooms and primary schools across China.

Way to go, Nippon Paint!

In new plant news, Akzo Nobel plans to invest Rs 150 crore in a new manufacturing plant at Gwalior in Madhya Pradesh, India.

"We are adding one more integrated greenfield site at Gwalior, for which we plan to invest up to Rs 150 crore this fiscal," Managing Director Amit Jain was quoted as saying in the company's annual report.

The work to establish integrated coatings facility at Gwalior has started. At present, the company operates five plants. The Netherlands-based company operates mainly in decorative paints, performance coatings and specialty chemicals in India, and recently made a foray into wood finishes.

It enhanced its manufacturing capacity last fiscal by commissioning a 30 million liter facility in Hyderabad. It also added capacity of coil coatings at Bangalore plant.

The company added that it would keep a close watch on the global trends and price movements in key raw materials. They almost have to, because Akzo follows a risk management policy, under which all material foreign currency exposures are hedged through forward covers, to protect against unexpected swings.

"Long-term agreements with strategic vendors have already been put in place, thereby guaranteeing raw material availability. In spite of these efforts, we still continue to face cost and margin pressures," Jain said.

In show news, Automotive Service & Repair Week (ASRW), which includes the International Autobody Congress & Exposition (NACE) and the Congress of Automotive Repair & Service (CARS), has announced that 13 paint and coatings companies are supporting this year's event through exhibit space and interactive sponsorships.

Confirmed paint companies that will exhibit at ASRW include DuPont Performance Coatings, BASF, Sherwin-Williams Automotive Finishes Corporation, Valspar, Matrix System Automotive Finishes, Axis Performance Coatings/Vogel Automotive Coatings, Fashion Paint and Silver Sails Paints.

In addition, other companies will exhibit at ASRW including Beta Color, Chemicar, ChemSpec USA Inc., Lusid Technologies Inc. and Roberlo, S.A.

In addition to exhibiting, DuPont Performance Coatings will again sponsor the Opening General Session/Keynote as well as the MSO Symposium. BASF is also sponsoring the MSO Symposium.

In other news, Flint Group will be participating at ProFlex, showcasing innovative products, technologies and sustainable solutions. Visitors to the 66th DFTA symposium that will take place on Sep 11-12 at the University of Media in Stuttgart. The division Packaging and Narrow Web presents VarioLam, a PUR-based ink system for all major films in packaging printing... more about this news

EcoSynthetix Inc. announced that FutureMark Paper Company has signed a 3 year contract for a minimum of 2.45 mn dry pounds of EcoSphere biolatex binders delivered annually to its Alsip, Illinois, mill. EcoSynthetix has agreed to install a state-of-the-art dry material handling solution to provide ample capacity for FutureMark to increase its use of biolatex in FutureMark's paper coating... more about this news

International Paint of Shanghai has established a long term strategic partnership with CSSC Chengxi Shipyard, designed to improve the sustainability of their businesses. The agreement signaled International® as one of the shipyard's 1st priority paint suppliers for all newbuilding projects. International® conducted a detailed analysis of Chengxi's production processes to improve coatings efficiency... more about this news

And finally, PIA recently presented Kodak with a 2012 InterTech Technology Award honoring Kodak's NEXPRESS Red Fluorescing Dry Ink's innovative capabilities. The KODAK NEXPRESS Red Fluorescing Dry Ink Solution helps printers provide increased security and fraud protection on documents, packaging, promotional, and direct mail materials and is part of the KODAK NEXPRESS Fifth Imaging Unit Solutions portfolio... more about this news

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