U.S.-based Corn Products International will buy the National Starch business of Dutch paints firm AkzoNobel for $1.3 billion in cash, completing the Dutch firm's delayed sale of non-core businesses.
AkzoNobel had acquired National Starch with its buyout of British paints firm ICI in 2008 and in April said it had received renewed expressions of interest in the unit, moving it to reclassify the business as a discontinued operation.
On Monday, AkzoNobel said Corn Products had agreed to buy the unit for $1.3 billion in cash, while an AkzoNobel spokesman said Corn Products would also assume about $100 million in pension and employee benefit liabilities.
I think it's a good price. It's on the high end of the range of estimates, Petercam analyst Jan van den Bossche said.
It's a market-leading asset in that industry, making it at the same time both interesting and difficult to sell because it's a consolidated market, so it's difficult to find a buyer.
Shares in AkzoNobel jumped to an eight-week high before sliding back slightly, but were up 1.95 percent to 45.91 euros at 4:10 a.m. ET, outperforming a 1.56 percent gain in the STOXX Europe 600 Chemicals index <.SX4P>.
AkzoNobel had encountered difficulties in selling the National Starch business due to the credit crisis, but analysts had estimated that an eventual sale could fetch the firm more than 1 billion euros ($1.24 billion).
This transaction today marks the strong focus on our core business and confirms AkzoNobel's transformation into the world's largest global coatings and specialty chemicals company, Chief Executive Hans Wijers said in a statement.
Corn Products said in a separate release the deal would increase its annual sales to almost $5 billion and generate cost synergies of at least $50 million, while on a cash basis the transaction is expected to be accretive by the end of 2011.
The company, a corn refining and ingredient firm, expects to finance the transaction through cash, debt and new equity.
An AkzoNobel spokesman said Corn Products would pay 8.6 times National Starch's estimated normalized 2010 earnings before interest, tax, depreciation and amortization (EBITDA).
National Starch has a normalized EBITDA of $135-$150 million, the spokesman said, but reported 78 million euros ($96.6 million) in EBITDA last year, hit by a negative corn pricing hedge.
The transaction has been approved by the boards of both companies and is expected to close at the end of the third quarter, subject to the appropriate regulatory approvals.
National Starch produces food ingredients and specialty starches and had 2009 sales of $1.2 billion.
(Reporting by Aaron Gray-Block; Editing by Jon Loades-Carter and Sharon Lindores)