AKZA Akzo Nobel NV

THE NEWS: Akzo Nobel on Tuesday announced the sale of its specialty chemicals business to Carlyle Group and GIC for 8.9 billion euros ($11.05 billion), a year after saying it would separate the unit as the paint maker fought off a hostile bid from U.S. peer PPG Industries.

THE MARKET REACTION: Markets cheered the news. Akzo shares were up 3.3% at 1108 GMT after rising as much as 5.7% earlier in the day.

THE RATIONALE: The sale is a key part of the Amsterdam-based manufacturer's plan to boost its share price in the face of pressure from U.S. activist hedge fund Elliott Management and other shareholders after successfully fending off the $27.6 billion takeover bid from PPG.

Akzo said last April that a separation of the unit would create superior value for shareholders compared with the PPG offer. Shareholders had already given a green-light to the sale of the unit in November.

VALUE FOR SHAREHOLDERS: Akzo said that it expects to receive EUR7.5 billion net from the deal, most of which will be returned to shareholders. Bernstein estimates that around 80% of the proceeds--EUR6 billion--will be returned, with the rest being used to pursue growth opportunities.

The bank said it wasn't clear whether the price that the unit fetched was any greater than what investors expected.

How the money will be returned--whether through a dividend or a share buyback--remains to be decided, but the company said it would update shareholders in due course.

WHAT'S NEXT: Having finalized the sale, Akzo Nobel can focus on its remaining paints-and-coating business, a unit that recorded a net profit of EUR75 million in the fourth quarter, down 44% from EUR133 million a year earlier, on flat revenue of EUR2.28 billion.

Last April, Akzo said it aimed to generate EUR50 million in cost savings proceeding from the separation, with another EUR150 million in annual savings resulting from improvement programs in its paints-and-coatings unit.

The disposal is expected to be complete by the end of this year.

(END) Dow Jones Newswires

March 27, 2018 07:54 ET (11:54 GMT)

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