Carlyle Buys DuPont Performance, Electrolube Opens in India, Research in Iran
- Sep 4, 2012
Hello and welcome to your early week international coatings industry update, brought to you by SpecialChem. Well, it finally happened, the announcement that Carlyle Group has indeed agreed to buy DuPont Performance Coatings came Thursday morning. That is our big story for this issue, so let's get to it.
The Carlyle Group says it is buying DuPont's performance coatings business for $4.9 billion in cash, giving it another investment in the automotive and industrial segments. Carlyle's investments in the automotive and industrial segments already include Allison Transmission, PQ Corp. and Hertz. The private equity firm will also take on $250 million of DuPont's unfunded pension liabilities.
The performance coatings business of E.I. DuPont de Nemours and Co. caters to the automotive and industrial coatings refinish sectors. The business is expected to have 2012 sales of more than $4 billion. It has more than 11,000 workers. DuPont Chair and CEO Ellen Kullman said in a statement Thursday that the transaction is consistent with its long-term strategy of "driving competitive advantages in agriculture and nutrition, advanced materials and biotechnology, which represent high-growth, high-margin opportunities." We have more on this deal where we continue.
Electrolube, has announced the opening of a new office in India to service the increasing market demand more effectively. The new warehouse and technical sales facility will be based in Bangalore, situated close to the major electronics manufacturing centers of Southern India. Electrolube aims to strengthen the company's presence in the market and stimulate interest in their long established and innovative new products, which include contact lubricants, conformal coatings, thermally conductive materials, resins and service and maintenance aids. The new office will support distribution based in North India by Sumitron and will concentrate on the Southern India technology manufacturing centers in Bangalore, Hyderabad, Mysore, Chennai and Pune.
Ron Jakeman, Group Managing Director of Electrolube's parent, H K Wentworth said, "It is a very dynamic time for Electrolube and indeed for materials innovation. India is a large and growing market for the electronics industry and expanding Electrolubes operations is a great opportunity. Having a direct presence in the country will allow us to improve contact with the market and provide first rate technical support to critical market sectors."
In research news, Iranian researchers from Amir Kabir University of Technology and University of Petroleum Industry announced that they have produced epoxy/polyamide coatings with improved anti-corrosive and physical properties by using zinc oxide nanoparticles.
The use of nanoparticle-based coatings increases noticeably the lifetime of the metallic structures. Due to small particle size and high specific area, zinc oxide nanoparticles are able to create a physical barrier against the diffusion of corrosive compounds into the coating and the surface of the metal. They also slow down the reaching of corrosive materials to the metal surface, and therefore, they increase the lifetime of the metallic structure.
Carlyle Group LP, the world's second-largest private equity firm, agreed last week to acquire E. I. DuPont de Nemours and Company's automotive paint unit for $4.9 billion, giving it control of the second-biggest maker of coatings for cars and trucks. Carlyle will fund its investment with equity from Carlyle Partners V and Carlyle Europe Partners III, and will assume $250 million of DuPont's unfunded pension liabilities, the companies said in a joint statement.
The sale tolls DuPont's exit from the auto paint market, in which it has been an integral figure since the advent of the car. U.S. auto output is still less than its pre-recession peak while the price of titanium dioxide, a raw material used in paint, has surged. DuPont Chairman and CEO Ellen Kullman is focusing on other industries such as food and biofuels.
Kullman told investors in December that she would give the business a chance to meet its latest targets. Wilmington, Delaware, USA-based DuPont's long-term goals for coatings included sales raising by 3% to 5% annually, the smallest targeted increase among the company's eight divisions.
Carlyle has been the most active buyer among the three largest private-equity firms this year, agreeing to acquire at least $16 billion of assets, according to data compiled by Bloomberg. Blackstone Group LP, the largest buyout firm, has been involved in $6.8 billion of purchases, while Apollo Global Management LLC, the third-biggest, has agreed to buy $7.9 billion of assets, the data say.
At least three other private-equity firms competed for the DuPont unit. Apollo withdrew from the bidding after declining to top Carlyle's offer, according to a person with knowledge of the matter, and KKR & Co. and Onex Corp. ended a joint bid, two people with knowledge of the matter said Aug. 1.
The DuPont deal will close in the first quarter of 2013, subject to regulatory approvals, the companies said. It would be the largest in the coatings industry globally in at least a decade. The next biggest was PPG Industries' 2.2 billion euro acquisition of SigmaKalon Group BV back in 2008.
The DuPont unit, which employs more than 11,000 people, saw second-quarter pretax operating income climb 26 percent to $92 million as revenue fell 1.4 percent to $1.09 billion. Sales will be more than $4 billion this year, Carlyle and DuPont said in their statement. From the third quarter, DuPont will report the unit's results as earnings from discontinued operations.
DuPont gained its place in the automotive paint hierarchy with its $1.9 billion acquisition of Herberts GmbH from Germany's Hoechst GmbH in 1999. DuPont cut 1,500 coatings jobs and shut factories in Europe seven years later after the business failed to achieve financial targets.
The company will use proceeds from the deal "in a manner consistent with its cash deployment principles and goal to maximize shareholder value creation," it said in Thursday's statement.
Kullman is focusing DuPont's growth on what she calls "megatrends" arising from global population growth: Improving food quality and agricultural productivity, cutting reliance on fossil fuels, and protecting the environment and people. She expanded last year in food ingredients and biofuel enzymes with the purchase of Danisco A/S.
DuPont, which also makes plastics for auto parts, supplied General Motors Co. in the 1920s with a spray-on coating that cut the weeks-long process of painting a car to six hours, according to DuPont's website. Incidentally, this "DuPont Process" also popularized the use of the high speed disperser and vertical media mill in the paint industry.
Speaking of automobiles, General Motors is planning a major expansion at its Fairfax assembly plant in Kansas City, Kansas. Officials said the company plans to seek $120 million in industrial revenue bonds to fund a new paint shop at the plant, where the Buick LaCrosse and Chevrolet Malibu are assembled.
The $120 million figure represents the level of industrial revenue bonds GM seeks for property and sales tax abatements related to new construction. The total investment in the project is expected to be significantly larger.
GM officials would not discuss the nature of the expansion. "We're looking into an addition and upgrades to the plant," said Lauren Indiveri, spokeswoman for the Fairfax plant.
The bond application indicated that the project would help retain 3,700 workers at the Fairfax plant.
"For the most part, this investment is going to be for the retention of existing jobs," Indiveri said.
The GM Fairfax plant is Kansas' largest manufacturing facility, based on its reported 4,000 local employees. GM is not announcing that it will do the expansion but that it is considering moving forward with the project if it can build a business case to do so.
Members of the Unified Government of Wyandotte County/Kansas City, Kan., were to be briefed on the project on Thursday. GM's decision to move forward with its project is contingent on the government's acceptance of the bond proposal. "Right now, it's in the hands of the UG," Indiveri said. "Once they go to the hearing, after that we will consider if we will move forward with the plan."
In African paint industry news, Kenya's paint manufacturer, Crown Paints Ltd, is set to put up a 250 million shillings ($3 million) plant in Tanzania as it expands its presence in the country where it currently has a distribution depot.
Crown Paints is targeting a 50% market share in the Tanzanian premium paints segment. The firm's CEO Rakesh Rao said the manufacturing plant will be established within the next 12 months. "We have commitment with the government to invest 250 million shillings in Tanzania," he said.
"We are currently exporting to South Sudan and Rwanda-which is one of the most innovative and premium markets, Burundi and also getting good market responses in Democratic Republic of Congo," added Rao.
Crown Paints expansion in the region boosted its profits for the first half of 2012. The firm posted a 46% jump in pre-tax profit to 110 million shillings ($1.3 million) for the six months ended June 30, up from the 75 million shillings ($892,000) it posted over a similar period last year.
Though Crown Paints faces stiff competition in the Kenyan market, its subsidiaries ended a loss making streak to contribute to the firms overall performance. "Our subsidiaries which have been making loss posted profit which improved our performance, and we hope to sustain this momentum to second half," said Rao.
The firm's turnover rose from by 16.5 percent from 1.8 billion shillings ($21 million) to 2.1 billion shillings ( $25 million), due to introduction of new products. "The introduction of Teflon surface protector to Matte Emulsion has been very successful and during this period the company launched products into Tanzania, starting with Arusha," said Crown Paints in a statement to the Nairobi Securities Exchange.
The firm is optimistic it will post positive results in the second half of 2012 as the macroeconomic environment improves. "We are already seeing a fall in interest rates and a stable exchange rate, which provides a positive outlook for the rest of the year," said Rao.
Increased road construction and real estate development in East Africa have boosted demand for paint in the region.
In new product news, Henkel last week announced that its Aquence Co-Cure technology has been selected for use by GreenVolt, Inc. for its higher-performing, lower cost protection against corrosion and UV-damage than methods currently used in the solar industry. Green Volts, provider of the world's only complete and fully integrated concentrating photovoltaic (CPV) solar system, and its investor and global strategic partner ABB, a leader in power and automation technologies, are the first to use this process for solar energy equipment.
Henkel worked with GreenVolts and leading paint and coatings company AkzoNobel to customize a process that layers Henkel's Aquence autodeposition coatings with Akzo's powder topcoat and "co-cures" them in a single oven. This lean paint shop process, which has been very successful in the automotive industry, now provides solar components with higher quality finishes, increased durability, and ultraviolet protection for 25 years. Additionally, the process reduces environmental impact, since it contains no heavy metals or sludge, and lowers water and energy requirements.
Most solar equipment manufacturers use a hot-dip galvanization process to protect their metal parts. While industry-standard, this process has drawbacks. The high temperatures can introduce stresses in the dipped metal parts. These stresses and any dimensional distortions can be weak points in a system. Also, the galvanization process leaves a thick layer that can be problematic for complex shapes, especially internal cavities. For example, threaded holes may reduce in size so that bolts do not fit properly. The Aquence process is more precise, and can provide a smoother, higher quality surface for topcoats and finishes.
In coating news from Pakistan, scientists from the National Institute of Food Science and Technology, University of Agriculture Faisalabad (UAF) have started applying the innovative edible coating technology under a joint project of Pakistan and the USA aimed at extending the shelf life of fruits.
The project's Principal Investigator Dr. Masood Sadiq Butt revealed this while briefing food scientists on the breakthrough. The core objective of the project, funded by the Higher Education Commission, is to reduce post-harvest losses and improve nutritional attributes of fruits.
Dr. Butt elaborated that the process involved the development of edible coating materials and their application to fruit through dipping and spraying. "These coatings act as a barrier to weight loss due to evaporation of water and protect fruits from other environmental factors," he said.
The research was being carried out on a range of fruits, including apples, mango, apricot and strawberries and involves the fruit being coated in a range of coverings. Butt expressed the hope that the increase in shelf life would pave the way for farmers and traders to export the fruits and earn revenue for the country.
In other news, PPG Industries will exhibit a complete line of environmentally advanced coil and extrusion coatings at CONSTRUCT 2012 and the Construction Specifier Institute (CSI) National Convention in Phoenix, Sept. 11-14. PPG products on display in booth 507 will include DURANAR(R) liquid and powder coatings...
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Avatrex Transportable Imaging was named as a recipient of 2012 InterTech Technology Award for being innovative and for the significant impact the technology is expected to have on the graphic communications industry. It is a thin, multi-layer coating with built-in adhesive and protection properties that can be printed with a variety of print platforms and transported to practically any surface...
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The Sansin Corporation announced that the Miller Paint Co. store in Spokane, Wash., will carry the full line of Sansin exterior stains for siding, decks and log homes, as well as Sansin's Purity® interior stains and the Eco-Tone™ color system. Miller Paint Co. held a grand opening event to introduce employees and customers to Sansin's environmentally friendly wood finish...
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And finally, at the Asia Pacific Coatings Show from Sep 19-20 in Jakarta, BYK Additives & Instruments will be presenting innovative additive solutions for the coatings and printing inks industry. CERAFLOUR® 1000 provides efficient matting and also involves a soft-touch effect. In addition, systems in which CERAFLOUR® 1000 is used exhibit a high degree of transparency and improved scratch resistance...
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