In fact a new type of coatings operation is emerging in Europe whose strategy is based on exploiting the synergies between coatings, adhesives and sealants.
Thus some observers were surprised that in its acquisition of ICI to create by far the largest decorative paints operation in the world, Akzo Nobel quickly decided to divest the adhesives business of ICI's subsidiary National Starch, which is No.2 in the world. Instead the operation together with National Starch's electronic materials activity is being sold to Henkel, the global leader in adhesives, whose technologies segment incorporates adhesives, sealants and coatings.
Henkel has agreed to pay Ł2.7 billion ($5.4 billion) for two National Starch businesses, of which adhesives is by far the biggest accounting for 22% of ICI's total sales of Ł4.8 billion last year, while the electronic materials' share was only four percent. National Starch has two other businesses in specialty starches and polymers which will come under Akzo Nobel's control.
"There are a lot of similarities between the technologies in coatings and those in adhesives and sealants, which you could argue Akzo Nobel with its large coatings operation could expoit " said one London-based analyst. "On the other hand coatings and adhesives often have different customers and require different marketing skills. But the real reason for the deal with Henkel was that it was the only way Akzo Nobel could afford the takeover of ICI."
In the face of hostility from the ICI board to its initial approaches, Akzo Nobel had to raise its bid from its first unofficial offer of 600 pence to 670 pence to clinch a recommendation of acceptance by ICI's directors. The increase, which boosted the offer to a 35% premium on ICI's average share price in the first half of this year and valued the company at approximately Ł8 billion, would be financed by the pact with Henkel.
The takeover still has to be approved by Akzo Nobel's shareholders some of whom have openly argued that it is still too expensive.
The big target for Akzo Nobel, 60% of whose sales of €10 billion ($14 billion) are in coatings and the remainder specialty chemicals, has been ICI's decorative paints business which with a small packaging coatings business accounts for approximately half ICI's turnover. The merger of the two coatings activities will create a decorative paints business with sales of approximately €5.5 billion with a strong presence in all the world's major regions.
"This acquisition is primarily about decorative paints," said Tim van der Zanden, Akzo Nobel spokesman. "We have offered the adhesives and electronic materials activities of ICI to Henkel because it can gain more synergies and added value from them than ourselves. It is a good deal for Henkel and for us."
Akzo Nobel has a small position in the adhesives market through Casco Adhesives in Sweden, which is market leader for glue and glue systems for the woodworking industry in the country.
National Starch's specialty polymers operation has an activity in emulsion powder polymers, which are used in tiling adhesives. But Akzo Nobel said the future of National Starch's polymers and starches operations will be reviewed, which analysts claim is an indication that they will be sold.
Ironically a few days after Akzo Nobel's first approach to ICI in June on a possible takeover, Graeme Armstrong, ICI's senior vice president, technology, outlined to a London seminar a vision for an integrated ICI business focussed on coatings, adhesives and specialty polymers, which together, he said, can give customers key "product functionalities."
Coatings provide protection, like waterproofing, and modification of appearance, while bonding compounds connect and secure materials and polymers can provide physical structures, Armstrong said.
For Henkel, adhesives, sealants and surface treatments are the three core activities within its technologies operation which last year had revenue of €3.5 billion, 28% of total sales. Coatings play a significant role in the surface treatment business which is a specialist in primer and pre-treatment coatings, mainly in the transportation sector, particularly for automobiles.
"Coatings is not an add-on activity for us," said a Henkel official. "We have recently been introducing innovative coatings to the market and are doing R&D in new coating technologies."
The company has recently launched under the Bonderite brand a pre-treatment nanoceramic coating of 20-30 nanometer thickness for metals. It causes less equipment contamination and consumes less energy that the traditional iron phosphates pre-treatment coatings.
Henkel has also been developing automotive coatings without PVC in anticipation that the application of PVC paints in Europe will be restricted because of new environmental regulations, including the European Union's new legislation on the disposal of vehicles at the end of their product life.
Sika AG, the Swiss-based producer of sealing, bonding and reinforcing materials, has been expanding its activities in coatings, mainly through takeovers.
Over the last 18 months the company's acquisitions' include that of DuPont's protective coatings business and Covercretel of Canada, a maker of coatings for industrial polyurethane flooring systems. The takeover of the DuPont business has enabled Sika to extend its operations in anti-corrosion and other protective coatings outside its main market of Germany.
Sika's three businesses of flooring, roofing and waterproofing, which together account for approximately 30% of its SFr4 billion ($3.3 billion) sales, are now heavily dependent on coating technologies.
The company has long term ambitions to gain 20-30% of the global markets for its main products in order to be leading players in each of them.
Ernst Baertschi, Sika's chief executive, told financial analysts earlier this year it would be easier to penetrate fragmented markets while innovative technologies would help gain market share even where economies are stagnating.
Sika is among a number of European companies aiming to use polyurethane technologies to exploit the synergies between coatings, adhesives and sealants. BASF revealed at a press conference on construction chemicals this summer that it will be using the group's expertise in polyurethanes to strengthen its presence in the sector for industrial and sports floorings.
Among polyurethane raw material suppliers, Bayer MaterialScience has been developing technologies which can be applied both as coatings and adhesives. One of its recent innovations is a polyurethane dispersion which is applied to a metal surface as a coating. When activated by heat it becomes an adhesive.