Akzo Nobel shares jump 10% after promoters announce India business sale to JSW Paints

The promoters of Akzo Nobel India have executed a share purchase pact with JSW Paints, the former said in an exchange filing on Friday, June 27, thereby confirming a CNBC-TV18 newsbreak. The stock has jumped 10% in response.

The deal has been announced at a price of ₹2,762.05 per share, which is a 16% discount to Akzo Nobel's price on Thursday. This takes the total transaction value to ₹9,400 crore.

While the first stake purchase will be done for a sum of ₹8,986 crore, there will also be certain contingent consideration amounts worth ₹447 crore, that may become payable going forward.

Akzo Nobel India's promoters will sell their entire 74.76% stake they hold to JSW Paints. Promoters will be selling their stake in Imperial Chemicals, Akzo Nobel Coating .

JSW Paints has announced the Open Offer price to be ₹3,417.77 per share, which is at a premium to Thursday's closing price for Akzo Nobel.

Parth Jindal, Managing Director of JSW Paints, in an exclusive conversation with Shereen Bhan at the World Economic Forum summit in Davos on January 23 this year, had described the Akzo Nobel India stake sale as an “exciting opportunity” and vowed to give “everything” in the battle to acquire the assets.

“There is no choice... I have to give everything I've got for Akzo Nobel India,” Jindal had said back then.

The news also confirms a CNBC-TV18 newsbreak dated May 26 that JSW Paints is set to acquire the promoter stake in the paint manufacturer. The deal was pegged at nearly ₹10,000 crore and was supposed to be announced towards the end of June.

Amnish Agarwal of Prabhudas Lilladher told CNBC-TV18 that the deal is at a big discount, especially when Akzo Nobel was already trading at a discount to its peers.

He now expects the industry dynamics to be more fierce, given the increased competitive intensity and that the industry market share picture will continue to be redrawn for the next few years.

Shares of Akzo Nobel India had opened lower on Friday but have quickly recoverd their losses to trade 4% higher at ₹3,316. The stock is down 32% from its 52-week high of ₹4,674.