Carlyle buying DuPont coatings business for $4.9B

AP News
Posted: Aug 30, 2012 3:00 PM
Carlyle buying DuPont coatings business for $4.9B

DOVER, Del. (AP) — The DuPont Co. said Thursday that it is selling its performance coatings business for $4.9 billion in cash to The Carlyle Group, giving the private equity firm another investment in the automotive and industrial segments.

DuPont CEO Ellen Kullman said the sale of the performance coatings unit will allow the Wilmington, Del.-based company to focus on higher-growth, higher-margin businesses. Those include agriculture and nutrition, bio-based industrials, and advanced materials, which Kullman said are the foundation of DuPont's long-term growth targets.

"The deal announced today is a continuation of the transformation of DuPont," Kullman told analysts in a conference call.

DuPont's stock was down 26 cents at $49.68 in afternoon trading. Its shares have fallen 8 percent since hitting a 52-week high of $53.98 in May.

The performance coatings business, which caters to the automotive and industrial coatings sectors, has about 11,000 employees in more than 70 countries. The unit has net assets valued at about $2 billion and is expected to have 2012 sales of more than $4 billion. But its 2011 pretax margin of about 6 percent was the lowest of all business units in DuPont, which has a goal of a long-term compound annual growth rate of 12 percent earnings.

"We've been clear over the last three years over where the company was going and the targets for any of our businesses to be a part of our portfolio," Kullman said Thursday, adding that the performance coatings unit has improved significantly since a management shake-up in 2010.

"But at the end of day, when you take a look at it ... we felt that there might be more value for them to create outside the company," she said.

In acquiring the performance coatings unit, Carlyle also will assume $250 million of DuPont's unfunded pension liabilities.

Carlyle's investments in the automotive and industrial segments already include Allison Transmission, PQ Corp. and Hertz.

"We will continue to work closely with automotive customers to apply our science-powered innovations related to light-weighting of vehicles, revolutionary and environmentally friendly refrigerants, bio-based seat fabrics and headliners, and next-generation biofuels," Kullman said.

The deal with the Carlyle Group is expected to close in the first quarter of next year. Carlyle said the DuPont transaction will be funded with equity from U.S. buyout fund Carlyle Partners V and Carlyle Europe Partners III.

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"DuPont Performance Coatings is a technology innovator and we look forward to building on its strong market presence to accelerate growth in emerging markets, particularly in China and Brazil," said Gregor Böhm, managing director of Carlyle's Europe Buyout team.

The sale to Carlyle comes after years of work by DuPont to improve the performance coatings unit.

In 2006, DuPont announced that it was cutting 1,500 jobs and closing four facilities in Europe in a restructuring of the performance coatings business. That announcement came shortly after DuPont said it was closing an automotive coatings lab in Troy, Mich., and eliminating 200 jobs there.

At the time, DuPont officials downplayed suggestions that the company should consider divesting itself of performance coatings, saying a balanced portfolio was important.

In 2009, as part of a companywide consolidation, the company said chief financial officer Jeffrey Keefer would assume oversight over the division. DuPont announced Keefer's resignation about a year after he assumed his new role and shortly after he told analysts the company was still not satisfied with the performance coatings unit.