by Lou Whiteman | Published August 31, 2012 at 8:37 AM
Private equity giant Carlyle Group continued its aggressive summer of spending, saying Thursday that it would buy the automotive coating business of DuPont Co. for $4.9 billion in cash.
Washington-based Carlyle will also assume about $250 million in unfunded pension liabilities as part of its deal for DuPont Performance Coatings, a $4 billion-sales provider of paints and related products for the transportation industry.
The target, known as DPC, operates manufacturing sites on six continents employing 11,000 people, and sells to customers in 120 countries both directly and through a network of 4,000 distributors.
The investment will be funded with equity from Carlyle Partners V and Carlyle Europe Partners III.
The buyout shop in a statement said it believes there is room for growth at DPC, particularly in emerging markets including China and Brazil.
"DuPont Performance Coatings is a successful business with attractive market positions, next-generation technology and established brands," Greg Ledford, a Carlyle managing director and head of the firm's industrial and transportation team, said in a statement. "Through targeted investments we will support DPC's product development and growth objectives as it transitions to a standalone company."
This is the third large deal Carlyle has announced since the beginning of July. The firm, led by David Rubenstein, last month backed portfolio company Genesee & Wyoming Inc.'s $2 billion purchase of RailAmerica Inc., and followed days later by joining BC Partners Ltd. to acquire pump assets of United Technologies Corp. for $3.46 billion.
Wilmington, Del.-based DuPont, formally E.I. du Pont de Nemours and Co., put the unit on the block in February as part of a broader effort to divest lower-margin units and focus resources on higher-value chemicals. The company on Wednesday announced a separate deal to sell its professional insecticides unit to Syngenta AG for $125 million.
Company chair and CEO Ellen Kullman said that "after a careful review," DuPont "determined that DPC's full growth potential would be best realized outside DuPont and through the sale to Carlyle." She said DuPont would focus on areas including agriculture and nutrition, advanced materials and biotech.
The company said it would use net after-tax proceeds from the sale in a manner "consistent with its cash deployment principles." DuPont will remain involved in the auto sector, providing refrigerants, seat fabrics, biofuels and light-weight materials, saying it expects post-deal to generate about $3 billion in annual sales from the industry.
Credit Suisse Group's Gerald Lodge and Spyros Svoronos and Greenhill & Co.'s Robert Greenhill and Birger Berendes provided financial advice to DuPont, with a Skadden, Arps, Slate, Meagher & Flom LLP team led by Brandon Van Dyke, Thomas Greenberg and Lou Kling providing legal advice. Latham & Watkins LLP's Daniel Lennon, David Dantzic, Jenny Van Driesen, Pat Shannon, Jason Licht and David Raab represented Carlyle, whose team consisted of Greg Ledford, Andrew Marino, Martin Sumner, Wes Bieligk, Gregor Böhm, Zeina Bain and Dennis Schulze.