Fevicol maker Pidilite has signed an agreement with Araldite maker Huntsman to acquire its India unit. The adhesive maker has entered into an agreement to acquire a 100 percent stake in Huntsman Advanced Materials Solutions Pvt. - a subsidiary of Huntsman Corp. that houses the company’s consumer adhesive business - for Rs 2,100 crore, according to an exchange filing, said a report by Bloomberg Quint. As per the exchange filing, the transaction, does not require any governmental or regulatory approval and is likely to be completed in the next few days, subject to certain pre-conditions being met prior to closing of the transaction.
Huntsman’s flagship brand ‘Araldite’ is the market leader in India among ‘epoxy adhesives’, especially used to join or bond metal surfaces. This is used by professional mechanics who repair machines, including automobiles and electrical equipment. Under the terms of the agreement, Huntsman will receive about 90 percent of the cash consideration at closing and balance 10 percent under an earnout within 18 months if the business achieves sales revenue in line with 2019.
In 2019, business revenue for Huntsman Advanced Materials was about Rs 400 crore. In addition to the Indian sub-continent, the acquisition includes a trademark license for Middle East, Africa and ASEAN countries. Analysts view the deal as a positive in medium term. “This acquisition fills a key gap in Pidilite’s strong adhesive portfolio, which was epoxy adhesives. Pidilite was the dominant market leader in all other segments of adhesives in India, except epoxy adhesives, before this acquisition,” Credit Suisse said in a note.
According to Dolat Capital, Huntsman Advanced Materials has strong presence in retail trade and will contribute to Pidilite’s existing strong portfolio. “With EV/sales of 5.2 times, the acquisition is in line with consumer peers. The acquisition is positive for Pidilite considering its strong cash position of Rs 1,900 crore. Huntsman Advanced Materials is likely to contribute 6-7% to Pidilite’s revenue,” said Sachin Bobade, Vice President (Research) at the brokerage. (Source: Bloomberg Quint)
