• Login
    • Join
  • FOLLOW:
  • Subscribe Free
    • Magazine
    • eNewsletter
    Checkout
    • Magazine
    • News
    • Research
    • Markets & Technologies
    • Raw Materials
    • Top Companies
    • Directories
    • Jobs
    • Events
    • Microsites
    • More
  • Magazine
  • News
  • Research
  • Markets & Technologies
  • Raw Materials
  • Top Companies
  • Directories
  • Jobs
  • Events
  • Microsites
  • Current / Back Issues
    Features
    Business Corner
    Editorial
    Digital Edition
    eNewsletter Archive
    Our Team
    Editorial Guidelines
    Subscribe Now
    Advertise Now
    World Reports
    eBook
    Top Features
    Biocides Market Outlook - 2027

    Lab & Testing Equipment Directory

    Aerospace Coatings

    Resins Update

    Coatings World Q&A: Eileen Weber of allnex
    Breaking News
    Online Exclusives
    Distributor News
    Financial News
    Paint & Coatings Manufacturer News
    People In the News
    Price Increases
    Product News
    Raw Materials & Equipment
    Video Bites
    Suppliers News
    Live From Shows
    Top News
    PPG Sets Goals to Reduce Greenhouse Gas Emissions, Unveils 2021 ESG Report

    Birla Carbon to Present Sustainable Carbon-based Solutions at PaintIndia 2022

    BTC Europe, NXTLEVVEL Biochem to Distribute Biobased & Biodegradable Solvents in Europe

    Nouryon Issues 2021 Sustainability Report

    PPG’s Diane Kappas Recognized as ‘Woman of Influence’ by Pittsburgh Business Times
    Top Companies report
    Market Research
    White Papers / Tech Papers
    Technical Papers
    Product Spec Sheets
    World Reports
    Adhesives and Sealants
    Aerospace Coatings
    Architectural Coatings
    Automotive Coatings
    Automotive Refinish
    Business Operation
    Color Trends & Forecast
    Construction Chemicals
    Corrosion Control
    Industrial Coatings
    Laboratory Equipment
    Marine Coatings
    Market Trends & Forecast
    Powder Coatings
    Production Equipment
    Radcure Coatings
    Special Purpose Coatings
    Wood Coatings
    "Green" Coatings

    BEHR Launches COPPER FORCE Interior Paint

    BASF Launches Ultradur B4335G3 HR HSP

    Sika Acquires United Gilsonite Laboratories

    Highlands and Rust-Oleum Announce Partnership

    PPG ENVIROCRON LUM Retroreflective Coating Illuminates New Lyft E-bikes
    Additives
    Binders
    Pigments
    Solvents

    Birla Carbon to Present Sustainable Carbon-based Solutions at PaintIndia 2022

    BTC Europe, NXTLEVVEL Biochem to Distribute Biobased & Biodegradable Solvents in Europe

    Nouryon Issues 2021 Sustainability Report

    BASF to Increase Prices for Select Polyalcohols in North and South America

    AGM Secures Exclusive Distribution Agreement with Indian Partner, Imkemex
    Company Capabilities
    Buyers Guide
    Distributor Guide
    Add New Company
    International Buyers Guide Companies
    Shepherd Color Company, The

    W. R. Grace & Co.

    Clariant Additives

    Active Minerals

    Pilot Chemical Company
    Industry Events
    Webinars
    Live From Show Event
    Top Events
    Utech Las Americas 2022

    CPCA Annual Conference

    PAINTINDIA 2022 Exhibition

    Southern Society for Coatings Technology Annual Meeting and Technical Conference

    UTECH Middle East/Africa Foam & Polyurethane Expo
    Companies
    White Papers/Tech Papers
    Product Spec Sheets
    Equipment
    Literature/Brochures
    Videos
    International Buyers Guide Companies
    Shepherd Color Company, The

    W. R. Grace & Co.

    Clariant Additives

    Active Minerals

    Pilot Chemical Company
    • Magazine
      • Current / Back Issues
      • Features
      • Editorial
      • Business Corner
      • Digital Edition
      • eNewsletter Archive
      • Editorial Guidelines
      • Subscribe Now
      • Advertise Now
    • Breaking News
    • Directories
      • Buyers Guide
      • Distributor Guide
      • Corporate Capabilities
      • Trade Associations
      • Add Your Company
    • Markets & Technologies
      • Adhesives and Sealants
      • Aerospace Coatings
      • Architectural Coatings
      • Automotive Coatings
      • Automotive Refinish
      • Business Operation
      • Color Trends & Forecast
      • Construction Chemicals
      • Corrosion Control
      • Industrial Coatings
      • Laboratory Equipment
      • Marine Coatings
      • Market Trends & Forecast
      • Powder Coatings
      • Production Equipment
      • Radcure Coatings
      • Special Purpose Coatings
      • Wood Coatings
      • "Green" Coatings
    • Raw Materials
      • Additives
      • Binders
      • Pigments
      • Solvents
    • World Reports
      • Africa Report
      • India/Asia Pacific Report
      • China Report
      • Europe Report
      • Latin America Report
      • Market Research
      • Russian Report
    • Top Companies
    • Online Exclusives
    • Slideshows
    • Experts Opinions
    • Blog
    • eBook
    • Infographics
    • Videos
    • Podcasts
    • Whitepapers
    • Jobs
    • Microsites
      • Companies
      • White Papers/Tech Papers
      • Product Spec Sheets
      • Equipment
      • Literature/Brochures
      • Videos
    • Events
      • Industry Events
      • Live From Show Event
      • Webinars
    • About Us
      • About Us
      • Contact Us
      • Advertise With Us
      • Privacy Policy
      • Terms of Use
    Expert's Opinion

    Analyst Upgrades Axalta; Looks at Potential Takeover of Braskem by LYB

    ...

    Analyst Upgrades Axalta; Looks at Potential Takeover of Braskem by LYB
    Related CONTENT
    • Eastman Chemical, Huntsman, LyondellBasell Industries - Raises Price Targets After Earnings
    • LyondellBasell Industries (LYB) - Analyst Comments on 3Q17 Results
    • PPG Industries (PPG) - Analyst Comments on Disappointing 3Q17 Margins/In-Line Results
    • Bayer Sells €1M of Stake in Covestro
    • Analyst Finds Silver Lining After PPG Industries (PPG) 2Q17 Results
    10.31.17
    Axalta (AXTA: Buy, $37 PT) 
    Akzalta? Upgrade to Buy on M&A Optionality

    • We upgrade AXTA shares to Buy from Hold with a target of $37. It seems there is never a dull moment in the rapidly consolidating coatings industry. Following a Reuters story on Friday that sent AXTA shares up 17.0%, the companies confirmed on Monday that they are engaged in “constructive discussions” regarding a merger of equals (MOE) transaction. It is not often that we would contemplate an upgrade in the wake of such a spike, but our analysis suggests that the prospective risk-reward profile is quite favorably asymmetric in light of a Akzo-Axalta deal, and AXTA shares did pull back 2.2% on Monday’s session. For reasons discussed below, we are not surprised by this potential combination and believe it can create substantial value for AXTA shareholders, particularly if Axalta’s management were lead the combined company with a free hand to extract synergies in relatively unfettered fashion. If a deal is struck, “Akzalta” would become the second-largest coatings company in the world as depicted in Figure 1. It would also mark the fourth trans-Atlantic MOE to be announced in the chemicals sector in recent memory, following Bayer-Monsanto, Praxair-Linde, and Huntsman-Clariant, although the latter deal was nixed by mutual consent last Friday.
    • We are not at all surprised by talks between Akzo and Axalta. We can think of six good reasons why these two companies would be at the table: (1) Axalta management has addressed potential for a transformational deal, first at our conference in June 2017 (click here) and again on the company’s 2Q17 earnings call on 3 August 2017; (2) the global coatings industry is consolidating rapidly with the latest large example being Sherwin Williams’ acquisition of Valspar for $11.3bn on 1 June 2017; (3) having spurned PPG’s final  offer of a 50% premium, Akzo arguably needs a...
    • How much value might be created? In our view, the answer to this question depends greatly on which management would run the combined company as well as the negotiated ownership levels in the combined entity. In the section that follows, we analyze two scenarios for an all stock MOE deal with different assumptions for management, synergy extraction, and value sharing…
    • We see three key risks: PPG, Elliott and anti-trust considerations. Even if a deal is reached, we see several barriers to closing: (A) PPG regains the flexibility to re-engage with Akzo and could put forth a new bid for the company at that time, although recent rhetoric emanating from PPG leadership  suggests that is perhaps unlikely; (B) Elliott reportedly controls in excess of 9% of Akzo shares and is the subject of a standstill agreement that is set to expire on... 
    • Our top 10 takeaways from 3Q: (1) adjusted EPS of $0.26 came in below our $0.28E but in line with consensus of $0.26; (2) adjusted EBITDA declined 10% y-y to $210mn; (3) total company sales increased 7.0% on acquisitions (+9.7%) and FX (+1.9%), while volume declined 3.9% and price eroded 0.7%; (4) Performance Coatings segment volumes sank 6.6% y-y, which we attribute to...
    • We remain somewhat below consensus for 2018. Our 2017 EBITDA forecast dips to $837mn including stock-based compensation or $875mn on apples-apples basis with Axalta’s new range of $870-900mn. For 2018 we model EBITDA growth of 7.8% vs. management’s goal of a double-digit pace, which we consider possible with the benefit of ongoing bolt-on acquisitions as has been the case recently (we do not incorporate hypothetical deals). On an EPS basis we now model $0.32E for 4Q17, followed by $1.30E in 2018, which is below consensus.   
    • We upgrade shares to Buy and raise our target to $37 on rising propensity for M&A. Our price target implies total return potential of 14% from current levels (AXTA shares do not currently pay a dividend). Given Axalta’s elevated exposure to autos, pockets of price and volume pressure across the portfolio, and somewhat diminished balance sheet flexibility, we feel that valuation is fair at $29 per share absent M&A-related optionality and at $37 per share given our probability-weighted value creation potential of nearly $8 per share as outlined in Figure x. As a reminder, our base-case valuation of AXTA is predicated upon on an average of two methodologies: DCF analysis and a relative P/E framework. Our DCF analysis suggests a warranted stock price of $30. Using our relative P/E framework wherein we apply a 15% premium to the S&P500 multiple, we calculate warranted value of $27 per AXTA share.   
    (Please see full report for details)
    ----
    LyondellBasell Industries (LYB: Buy, $108 PT) 
    The Boys from Brazil

    • A possible takeout of Braskem looks quite attractive. According to the Wall Street Journal, LyondellBasell is in “early stage” talks regarding potential takeover of Braskem SA. The transaction would be Lyondell’s largest since emerging from bankruptcy in April 2010 and the second-largest M&A deal in Brazil, according to Dealogic. Our preliminary view is that a Lyondell-Braskem combination would be sensible, both strategically and financially, and perhaps timely in that it strikes us as counter-cyclical with respect to the ethylene cycle and the Brazilian industrial economy. Such a move would also be consistent with Lyondell’s growing appetite for M&A, as articulated at the company’s most recent investor day in NY on 5 April (click here). LYB shares responded favorably, rising 7.1% on Monday’s session vs. -0.3% for the S&P500 index.
    • We have considered polyolefins to be one of three areas of interest to Lyondell. We have long viewed olefins and polyolefins (plastics) as a logical source of external growth for Lyondell, along with urethanes and acetyls. In contrast, we consider M&A potential in chlor-alkali and styrenics to be far less likely. In this context, a potential tie-up with Braskem, a US leader in polypropylene (PP) resin, makes sense to us. Given Lyondell’s...
    • Braskem’s low multiple could facilitate a highly accretive cash deal. Braskem could be a $20.1-23.3bn deal taking into account Braskem’s undisturbed equity value of US$11.5bn (at BRL47.56 per share) and adding a hypothetical equity takeout premium of 35%, net debt of $4.8bn or $7.9bn including obligations related to BraskemIdesa’s $5.2bn petrochemical complex in Mexico, which appears to be out of compliance on covenants and therefore consolidated into Braskem’s balance sheet as of 30 June 2017. This would translate to a range of 6.2-7.0x Braskem’s 2018 consensus EBITDA of US$3.3bn. Based on these economics and assuming all cash financing, we estimate year one EPS accretion of $2.31 and ROIC of 11.4% in year one.
    • Key risks: PP resin market scrutiny and key shareholder support. As shown in Figure 3, Lyondell and Braskem are essentially co-leaders in the North American market for PP resin, each with estimated share of 18%. While we consider PP resin to be a global market, it is not clear to us that pro forma regional market share of 36% would pass muster with US anti-trust authorities. While Braskem is a Brazilian company, we note that two of the company’s PP resin plants in... 
    • We rate shares of LYB Buy with a price target of $108. Excluding any incremental value to be created (or destroyed) from M&A, our existing price target suggests total return potential of 6%, including a dividend yield of 3.6%. As a reminder, our LYB price target is based on an average of two valuation frameworks; a relative EV/EBITDA multiple and a relative normalized P/E multiple. Our relative EV/EBITDA multiple uses a 2.75x discount to the group average multiple and reflects a stock price of $113, while our normalized P/E methodology reflects a warranted stock price of $102 based on our normalized EPS estimate and a multiple equal to a 30% discount to the sector average multiple.
    (Please see full report for details)
     
    Related Searches
    • merger
    • industrial
    • clariant
    • case
    Suggested For You
    Eastman Chemical, Huntsman, LyondellBasell Industries - Raises Price Targets After Earnings Eastman Chemical, Huntsman, LyondellBasell Industries - Raises Price Targets After Earnings
    LyondellBasell Industries (LYB) - Analyst Comments on 3Q17 Results LyondellBasell Industries (LYB) - Analyst Comments on 3Q17 Results
    PPG Industries (PPG) - Analyst Comments on Disappointing 3Q17 Margins/In-Line Results PPG Industries (PPG) - Analyst Comments on Disappointing 3Q17 Margins/In-Line Results
    Bayer Sells €1M of Stake in Covestro Bayer Sells €1M of Stake in Covestro
    Analyst Finds Silver Lining After PPG Industries (PPG) 2Q17 Results Analyst Finds Silver Lining After PPG Industries (PPG) 2Q17 Results
    AkzoNobel Reaches Agreement with Elliott AkzoNobel Reaches Agreement with Elliott
    Axalta Coating Systems Ltd.: M&A Opportunity Set Expands Axalta Coating Systems Ltd.: M&A Opportunity Set Expands
    AkzoNobel’s Success Over Takeover Bid Could Slow Down Consolidation Trends AkzoNobel’s Success Over Takeover Bid Could Slow Down Consolidation Trends
    Rivalry at the Top? Growing Concentration in the Coatings Industry Rivalry at the Top? Growing Concentration in the Coatings Industry
    All Eyes on the Coatings Industry All Eyes on the Coatings Industry
    Report: PPG Divestitures Report: PPG Divestitures 'Sensible Despite a Dime of Dilution'
    Report: PPG Divestitures Report: PPG Divestitures 'Sensible Despite a Dime of Dilution'

    Related Content

    • Breaking News
      Eastman Chemical, Huntsman, LyondellBasell Industries - Raises Price Targets After Earnings

      Eastman Chemical, Huntsman, LyondellBasell Industries - Raises Price Targets After Earnings

      ...
      10.30.17

    • Breaking News
      LyondellBasell Industries (LYB) - Analyst Comments on 3Q17 Results

      LyondellBasell Industries (LYB) - Analyst Comments on 3Q17 Results

      ...
      10.27.17

    • PPG Industries (PPG) - Analyst Comments on Disappointing 3Q17 Margins/In-Line Results

      PPG Industries (PPG) - Analyst Comments on Disappointing 3Q17 Margins/In-Line Results

      ...
      Kevin McCarthy, Chemicals Anyalyst, Vertical Research Partners 10.19.17


    • Breaking News | Financial News | Industry News
      Bayer Sells €1M of Stake in Covestro

      Bayer Sells €1M of Stake in Covestro

      ...
      10.06.17

    • Business Operation | Market Trends & Forecast
      Analyst Finds Silver Lining After PPG Industries (PPG) 2Q17 Results

      Analyst Finds Silver Lining After PPG Industries (PPG) 2Q17 Results

      ...
      Kevin McCarthy, Chemicals Analyst, Vertical Research Partners 09.13.17

      Trending
      • BEHR Launches COPPER FORCE Interior Paint
      • BEHR Launches COPPER FORCE Interior Paint | Coatings World
      • BASF Launches Ultradur B4335G3 HR HSP
      • AkzoNobel and Partners Team Up to Hack Carbon Reduction Challenge
      • Asian Paints Reports 4Q, Full Fiscal Year 2022 Results
      Breaking News
      • PPG Sets Goals to Reduce Greenhouse Gas Emissions, Unveils 2021 ESG Report
      • Birla Carbon to Present Sustainable Carbon-based Solutions at PaintIndia 2022
      • BTC Europe, NXTLEVVEL Biochem to Distribute Biobased & Biodegradable Solvents in Europe
      • Nouryon Issues 2021 Sustainability Report
      • PPG’s Diane Kappas Recognized as ‘Woman of Influence’ by Pittsburgh Business Times
      View Breaking News >
      CURRENT ISSUE

      May 2022

      • Biocides Market Outlook - 2027
      • Lab & Testing Equipment Directory
      • Aerospace Coatings Market

      Cookies help us to provide you with an excellent service. By using our website, you declare yourself in agreement with our use of cookies.
      You can obtain detailed information about the use of cookies on our website by clicking on "More information”.

      • About Us
      • Privacy Policy
      • Terms And Conditions
      • Contact Us

      follow us

      Subscribe
      Nutraceuticals World

      Latest Breaking News From Nutraceuticals World

      Thorne Relaunches Gut Health Test with Microbiome Wipe
      Alkemist Labs Announces Alkemist Assured Seal and Next Generation Transparency Reports
      GC Rieber Foundations Expand Philanthropic Efforts
      Coatings World

      Latest Breaking News From Coatings World

      PPG Sets Goals to Reduce Greenhouse Gas Emissions, Unveils 2021 ESG Report
      Birla Carbon to Present Sustainable Carbon-based Solutions at PaintIndia 2022
      BTC Europe, NXTLEVVEL Biochem to Distribute Biobased & Biodegradable Solvents in Europe
      Medical Product Outsourcing

      Latest Breaking News From Medical Product Outsourcing

      Anumana's ECG Pulmonary Hypertension AI Algorithm Gains Breakthrough Status
      inHEART's 3D Cardiac Modeling Tool Earns FDA Nod
      FDA OKs RapidAI's Pulmonary Embolism Triage, Notification Tool
      Contract Pharma

      Latest Breaking News From Contract Pharma

      Corealis CDMO Completes Deal with ArchiMed
      Piramal Pharma Solutions Upgrades Oral Solid Dose Capabilities
      Steriline Robotic Applications to Improve Quality in Drug Primary Packaging
      Beauty Packaging

      Latest Breaking News From Beauty Packaging

      L'Oreal CEO Nicolas Hieronimus On Sustainability Initiatives
      Glossier Announces New CEO
      Men’s Skincare Market to Hit $13 Billion by End of 2022
      Happi

      Latest Breaking News From Happi

      Zocdoc’s Appointment Analysis Shows Consumers Are Seeking Skin Health Care in Person Again
      Four Seasons Resort Maui To Offer Project Reef Sunscreen Beginning on World Oceans Day
      IFSCC Extends 2022 Early Bird Registration
      Ink World

      Latest Breaking News From Ink World

      HP Indigo Reaches 2,000th Active Install
      Siegwerk Introduces New NC-Based Flexible Packaging Ink
      Sun Chemical Expands SunColorBox with SunConnect
      Label & Narrow Web

      Latest Breaking News From Label & Narrow Web

      AWA to host 22nd Global Release Liner Industry Conference & Exhibition
      Domino assists Grace Label with supply chain disruptions
      Rotocon wins AI Business Excellence Award
      Nonwovens Industry

      Latest Breaking News From Nonwovens Industry

      Thorne Relaunches Gut Health Test with Microbiome Wipe
      Thinx Names Meghan Davis as CEO
      Kimberly-Clark Reportedly Examining Sale of Latin American Tissue
      Orthopedic Design & Technology

      Latest Breaking News From Orthopedic Design & Technology

      Extremity Medical Rolls Out OMNI Stable Ankle Fracture System
      James W. Stone Named AANA President
      Tom Hedman Named Senior Principal Scientist at Spinal Simplicity
      Printed Electronics Now

      Latest Breaking News From Printed Electronics Now

      Canatu Receives IATF 16949:2016 Certification
      Applied Materials Announces 2Q 2022 Results
      ams OSRAM Supervisory Board to Elect Dr. Margarete Haase as Chairwoman

      Copyright © 2022 Rodman Media. All rights reserved. Use of this constitutes acceptance of our privacy policy The material on this site may not be reproduced, distributed, transmitted, or otherwise used, except with the prior written permission of Rodman Media.

      AD BLOCKER DETECTED

      Our website is made possible by displaying online advertisements to our visitors.
      Please consider supporting us by disabling your ad blocker.


      FREE SUBSCRIPTION Already a subscriber? Login