Jindals Pursue Reverse Merger with Akzo to Launch Paints Business

Billionaire Sajjan Jindal is set to take JSW Paints public through a reverse merger with Akzo Nobel India, following the acquisition of the Dulux paints manufacturer. The Jindal family will maintain a controlling interest in the newly formed entity, which will also include private equity investors and public shareholders. This strategic move is expected to enhance JSW’s position in the competitive Indian paint market, propelling the company to the fourth spot in the decorative paints sector.

Details of the Acquisition

JSW Paints plans to finance the acquisition of Akzo Nobel India, valued at Rs 13,336 crore, through a combination of private equity funding, internal accruals, and contributions from the promoters. Each source will contribute one-third of the required funds. Parth Jindal, Managing Director of JSW Paints and son of Sajjan Jindal, emphasized that the reverse merger is structured to convert private equity investors’ capital into a stake in the merged entity based on its performance. This acquisition marks a significant milestone for JSW Paints, which entered the industry only in 2019.

The merger is expected to elevate JSW Paints to a competitive position within the market, allowing it to challenge established players like Kansai Nerolac, Berger Paints, and Asian Paints. Parth Jindal expressed confidence that the acquisition would help the company achieve its goal of ranking among the top three players in the Indian paint industry, a standard the JSW Group has set in its other business sectors, including steel and energy.

Strategic Partnerships and Royalties

As part of the acquisition agreement, JSW Paints will pay a 4.5% royalty on its liquid coatings sales to Akzo Nobel Netherlands. This arrangement allows JSW to leverage Akzo Nobel’s intellectual property rights for decorative paints sold under the Dulux brand. Additionally, JSW has entered into a technological alliance with Akzo Nobel Netherlands for its liquid coatings, which are marketed under the International and Sikkens brands. This collaboration is expected to enhance JSW’s product offerings and technological capabilities in the paint sector.

The partnership with Akzo Nobel is seen as a strategic move to bolster JSW’s market presence and operational efficiency. By utilizing Akzo Nobel’s established brand recognition and product quality, JSW aims to capitalize on the growing demand for decorative paints in India. The merger is anticipated to provide the necessary resources and expertise to accelerate JSW’s growth trajectory in this competitive market.

Akzo Nobel’s Perspective on the Sale

Greg Poux-Guillaume, CEO of Akzo Nobel, explained the rationale behind the decision to sell its India business. He acknowledged that while the company possesses strong product quality and brand recognition, it struggled to fully exploit the market potential due to a lack of local distribution capabilities. Poux-Guillaume noted that as a multinational corporation, Akzo Nobel sometimes faced distractions that hindered its ability to convert brand value into market share.

The divestment will allow Akzo Nobel to focus on its remaining operations in India, which will now include a powder coatings business, a research and development center, and a global business services center located in Pune. This strategic shift is intended to streamline Akzo Nobel’s operations and enhance its overall effectiveness in the Indian market.

Future Prospects for JSW Paints

Following the merger, JSW Paints will join the ranks of six publicly traded companies under the JSW Group, collectively valued at Rs 4.5 lakh crore. Sajjan Jindal’s vision for JSW Paints is to establish a strong foothold in the Indian paint industry, similar to the group’s success in other sectors. The company aims to leverage its enhanced capabilities and market position to drive growth and innovation in the decorative paints segment.

With the backing of private equity investors and a clear strategy for expansion, JSW Paints is poised to make significant strides in the industry. The merger with Akzo Nobel India not only strengthens its market position but also aligns with the broader goals of the JSW Group to remain a leader in every sector it enters. As the company prepares for its public listing, stakeholders will be keenly watching its progress in the competitive landscape of the Indian paint market.

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