AkzoNobel-Axalta merger gives coatings firm extra layers

Dutch coatings giant AkzoNobel and US firm Axalta have agreed to merge into a $25 billion (£19 billion) global coatings company. The firms touted complementary portfolios and estimated around $600 million in projected cost savings.

This deal had been mooted multiple times and first tried in 2017. In the new arrangement, AkzoNobel shareholders would own 55% and Axalta shareholders 45% of the new company, based in the Netherlands but listed on the New York Stock Exchange. AkzoNobel had 2024 revenue of $11.6 billion, Axalta $5.3 billion

The move is part of an ongoing trend, says James Hooper, coatings analyst at investment research firm Bernstein. ‘In the paint and coatings sector, scale really matters and this is part of a general consolidation.’ Other big players are Sherwin-Williams, which became the largest paint company after acquiring Valspar in 2016; PPG Industries, which acquired Europe’s SigmaKalon in 2008; and Nippon Paint Holdings in Japan, which bought Dun-Edwards in the US in 2016.

AkzoNobel boasts strengths in the coating segments of industrial and protective; marine; powder; and decorative, with its Dulux brand. Axalta was spun out of DuPont in 2013 and focuses on industrial and automotive coatings, especially in the US. ‘The two businesses complement each other well, in a fragmented industry suffering from weaker than anticipated demand,’ notes Mike Nash of Chemical Market Analytics.

There is a prevailing assumption that scale is key for long-term survival

Analysts see the long-term outlook for coatings as positive, but the sector has been buffeted by broader economic conditions. ‘All major coatings players are facing significant market headwinds and there is a prevailing assumption that scale is key for long-term survival,’ notes Nash.

The new company would have a global footprint of 173 manufacturing sites and 91 R&D facilities, with $400 million annual R&D spend, enabling it to bring global capabilities to local customers, Akzo said. 

‘I don’t think this merger is much about growth,’ says Hooper. He suspects to see the business look for efficiency savings and strip out costs, ‘which usually includes people’. AkzoNobel said it would achieve 90% of the $600 million cost savings within three years.

Analysts do not foresee regulatory barriers since there is not significant overlap in the companies’ activites. ‘The main overlapping businesses are in vehicle refinish and general industrial and wood coatings,’ says Hooper. There is a possibility that they may be forced by regulators to sell some of these parts, reducing the potential scope of cost savings.

In October, BASF carved out its coatings as a standalone business, with private equity group Carlyle partnering with Qatar Investment Authority to own a 60% stake. Earlier in the year BASF sold its decorative paints business in Brazil to Sherwin-Williams for over $1 billion.

The bigger coatings firms are somewhat restricted in who they can buy because of competition concerns. ‘You couldn’t put Axalta with BASF because of [competition] issues,’ says Hooper. Neither AkzoNobel nor Sherwin do much automotive paint, so either could buy Axalta, he adds. Sherwin-Williams is big enough to buy AkzoNobel, says Hooper, but this is unlikely.

Hooper says the biggest growth segments are marine, protective and aerospace coatings. ‘General industrial and decorative growth is slower because it relies more on the average consumer, who has been struggling with cost-of-living pressures.’

In a conference call, AkzoNobel chief executive, Greg Poux-Guillaume, said: ‘this is a really fragmented industry where there’s ample competition.’ PPG, Sherwin-Williams and AkzoNobel are likely to be open to more acquisitions, says Hooper, adding that there are various smaller, more specialist firms that would be attractive, if put up for sale.

The transaction is expected to close in late 2026 to early 2027, and Nash believes it ‘puts pressure on other major coatings manufacturers such as PPG and Sherwin-Williams to consider their own scale, and how this influences their R&D capability and global purchasing and sales contracts,’ such as with global automotive giants. ‘The industry will see further merger and acquisition activity,’ he concludes.