David Savastano, Contributing Editor11.25.24
Relatively speaking, the merger and acquisition side has been fairly quiet in the paint and coatings segment in recent years. However, in the last two months, we have seen two dramatic announcements in terms of acquisitions, and these two signal major changes going forward for employees and the companies themselves.
So how did Heubach get to this point? Heubach was a profitable, family-owned company, specializing in pigments for two centuries. In a huge move, Heubach teamed up with SK Capital Partners, a major private investment firm, to acquire the pigment division of Clariant in 2021. The deal was closed in January 2022, forming the second-largest pigment manufacturers globally.
At the time of the acquisition, Heubach had approximately 1,000 employees and four locations. Clariant had 13 manufacturing locations and 1,900 employees.
With COVID still a concern, it was a daring move. The new Heubach reported sales of €1 billion as recently as 2022. However, margins for the pigment industry have not been particularly healthy, and the financial weight of the merger was impossible to overcome. Interest rates have remained high; add to that the raw material issues of the past few years and Heubach found itself in fiscal trouble.
The newly combined company has 19 manufacturing locations worldwide; it remains to be seen if Sudarshan will keep all of them open.
A bit of background here: in February 2024, PPG, the world’s second-largest paint and coatings manufacturer according to Coating World’s 2024 Top Companies Report, surprised just about everyone when it announced it was planning a strategic review of its architectural paint business in the US and Canada.
In terms of sales, this is an approximately $2 billion business, or more than 10% of PPG’s revenue, and the company reported it had 6,600 employees in this group. These include well-known brands as Glidden, Olympic and others, as well as roughly 750 company-owned stores.
The price AIP paid is interesting; AIP valued the acquisition at a transaction price of $550 million. That tells you the margins of the business had to be low; PPG has said EBITDA is in the low single digits. There is going to be a cost reduction program put in place, with layoffs of approximately 1,800 employees between this segment and the silicas business PPG sold off earlier this year.
It’s also not going to be the last bad news. In September 2024, AkzoNobel reported its own cost reduction program, announcing that by the end of 2025, the third-largest coatings manufacturer is looking to reduce approximately 2,000 positions worldwide.
There are going to be challenging times ahead for businesses in general, and we are likely to see further M&As and layoffs down the road.
Sudarshan Chemical and Heubach GmbH
We’ll begin with Sudarshan Chemical’s announcement that it is acquiring Heubach GmbH. It was no mystery that Heubach was up for sale; in April 2024, Heubach was required to file for insolvency in the German courts. The only real surprise was that Sudarshan was the company acquiring it.So how did Heubach get to this point? Heubach was a profitable, family-owned company, specializing in pigments for two centuries. In a huge move, Heubach teamed up with SK Capital Partners, a major private investment firm, to acquire the pigment division of Clariant in 2021. The deal was closed in January 2022, forming the second-largest pigment manufacturers globally.
At the time of the acquisition, Heubach had approximately 1,000 employees and four locations. Clariant had 13 manufacturing locations and 1,900 employees.
With COVID still a concern, it was a daring move. The new Heubach reported sales of €1 billion as recently as 2022. However, margins for the pigment industry have not been particularly healthy, and the financial weight of the merger was impossible to overcome. Interest rates have remained high; add to that the raw material issues of the past few years and Heubach found itself in fiscal trouble.
The newly combined company has 19 manufacturing locations worldwide; it remains to be seen if Sudarshan will keep all of them open.
PPG’s US and Canada Architectural Paints Business
In terms of how it will assimilate its new addition, it is uncertain what will happen with Sudarshan Chemical’s purchase of Heubach. With the even larger acquisition of PPG’s architectural paint business by industrial investor American Industrial Partners (AIP) in the middle of October 2024, the ramifications are already clear.A bit of background here: in February 2024, PPG, the world’s second-largest paint and coatings manufacturer according to Coating World’s 2024 Top Companies Report, surprised just about everyone when it announced it was planning a strategic review of its architectural paint business in the US and Canada.
In terms of sales, this is an approximately $2 billion business, or more than 10% of PPG’s revenue, and the company reported it had 6,600 employees in this group. These include well-known brands as Glidden, Olympic and others, as well as roughly 750 company-owned stores.
The price AIP paid is interesting; AIP valued the acquisition at a transaction price of $550 million. That tells you the margins of the business had to be low; PPG has said EBITDA is in the low single digits. There is going to be a cost reduction program put in place, with layoffs of approximately 1,800 employees between this segment and the silicas business PPG sold off earlier this year.
More Layoffs
This isn’t the first bad news for paint and coatings company employees this year. The most dramatic announcement came in January 2024, when Kelly-Moore Paint Company laid off its nearly 700 employees before shuttering its business. This was the result of the company being unable to absorb legal settlements from asbestos claims as well as supply chain disruptions.It’s also not going to be the last bad news. In September 2024, AkzoNobel reported its own cost reduction program, announcing that by the end of 2025, the third-largest coatings manufacturer is looking to reduce approximately 2,000 positions worldwide.
There are going to be challenging times ahead for businesses in general, and we are likely to see further M&As and layoffs down the road.
