US private equity group Apollo has teamed up with one of the Netherlands’ largest pension funds as co-investors to buy a piece of Akzo Nobel’s business as it looks to position itself as a viable Dutch option in a fiercely contested auction.
If successful, PGGM, which has roughly €200bn of assets under management, would be a minority co-investor alongside the New York-based buyout fund in acquiring Akzo’s €10bn speciality chemicals unit, two people familiar with the move said.
The bid comes after Apollo already teamed up with German chemical maker Lanxess in a bid to demonstrate its expertise in the area and following its own experience with chemical businesses, including the 2010 restructuring of chemicals company LyondellBasell.
Apollo’s buying strategy is a reflection of how difficult it is becoming to clinch deals in a market where both competition and prices are high, industry experts said.
Private equity groups are under pressure to deploy cash as yield starved investors have increased their allocation to the asset class.
Having raised a $25bn fund last year Apollo is under particular pressure to use the cash for big-ticket transactions.
The wall of cash flowing into the market has added even more intensity to the battle for Akzo’s unit, which makes an array of chemical building blocks ranging from chlorine and salt to ingredients for soap and pesticides.
It is not the first time Apollo has sought to team up with a local player to win auctions.
In 2015 it brought in France’s state-backed investment fund, Bpifrance, when buying Saint Gobain’s glass bottle unit.
The US buyout fund, which is competing against Carlyle, Bain and Advent and Hal Investments, already failed to buy Unilever’s spread business last year.
To show how determined it is to buy Akzo’s unit, Apollo has even pulled out of any big European chemicals auctions, including Linde-Praxair’s disposal of assets.
“They are committed to win this,” said a person involved in the auction process.
Apollo and PGGM declined to comment.
But the US buyout fund is not the only one with a strong buying strategy looking to secure Akzo’s unit.
Washington-based Carlyle will emphasise its experience with acquiring industrial companies and also its acquisitions of chemical businesses, including its 2013 purchase of Axalta, which was previously known as DuPont Performance Coatings.
Bain and Advent, a private equity duo used to carry out transactions together, will also focus on their experience buying chemicals businesses and Dutch companies.
Yet all their knowledge and expertise will not be enough, say people familiar with the transaction. “At the end of the day this will go to the bidder paying the highest amount,” said a person with direct knowledge of the talks.
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