Shares of Akzo Nobel India are sharply higher by nearly 6% in early trade on December 18, with talks revolving around a deal value of $2-2.5 billion for the Dulux Paints maker, as the race gets tighter with Pidilite Industries, JSW Paints and Indigo Paints in the fray, as per a news report in Livemint.
The report quoted people familiar with the development who said that both Indigo and JSW Paints are in talks with private equity investors for the stake buy, while Pidilite Industries is offering a share swap deal. Parent Akzo Nobel NV has hired Citigroup for the sale of nearly 75% stake in its India unit, the report added.
The surge in Akzo Nobel India on December 18 has come on very strong volumes that are significantly higher than the one-month average. The share price of Indigo Paints and Pidilite Industries are muted in the trading session.
Earlier in October, Asian Paints CEO Amit Syngle too had hinted about potential acquisition of Akzo Nobel's India assets. Syngle had said that in a large industry with some smaller players, there is bound to be some consolidation.
Dulux owner Akzo Nobel India had on November 22 approved the proposal of selling non-productive assets of the company. Akzo is re-evaluating its position in India amid intensifying competition in the decorative paints segment, which the company has described as 'ripe for consolidation'.
Chairman and Managing Director Rajiv Rajgopal had in November said that the Akzo Nobel is weighing the future course and conducting a reassessment. "We are running a strategic review across various businesses. They are looking at what exactly are the sort of things that they really want to do? The idea is how can we move this company into a winning position given the competitive intensity in the market. And so they're going to look at all options."
Demand conditions for the paint industry have been tough in the first half of the year due to a severe heatwave and general elections, followed by an extended monsoon. The entry of a strong player in Birla Opus has also added to the competitive intensity, leading to pricing pressure.
Akzo Nobel India's market capitalisation is near Rs 16,700 crore and the shares are higher by 41% since the start of the year.
You can track Akzo Nobel's September quarter earnings right here.
In its latest note, Nuvama had said that it continues to prefer small paint players like Berger Paints and Indigo, with a buy call on both of them. However, the brokerage prefers Pidilite over paints players. Indigo Paints has been constantly outpacing the industry for the past six quarters and expects to continue to outstrip the industry growth, Nuvama said in a note on December 18.
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