Axalta launches strategic review, sale of company possible

15:54 PM | June 19, 2019 | Vincent Valk

SOFT AUTOS: Key end market for Axalta has been a drag.

Axalta today said it is launching a review of strategic alternatives, including a potential sale of the company. Axalta shares jumped 13.6% after the news on 19 June, closing at $29.33. 

The company has formed a strategic review committee chaired by independent presiding director Mark Garrett. The committee also includes Axalta CEO Robert Bryant and independent director Samuel Smolik.

"Axalta continues to execute on its long-term strategy, delivering significant cost savings to bolster our industry-leading margins, redeploying free cash flow to drive accretive organic and inorganic growth initiatives, and returning more than $380 million to shareholders over the last two years," Bryant says.

Axalta's largest shareholder is Berkshire Hathaway, with a 10.3% stake. Barclays and Evercore are acting as financial advisors to Axalta on the review, and Morrison & Foerster is acting as legal advisor.

The company is facing headwinds from soft automotive production, although pressure on margins seems likely to abate given a recent pullback in energy prices, says Laurence Alexander, an analyst with Jefferies (New York). “Axalta has discussed a sale of the company in the past, and our model pegs the company value at $38/share,” Alexander adds. “Over the past three years, bolt-on M&A and share repurchases have been the first use of cash.”

The timing and outcome are uncertain, and Axalta says it will not comment on the review until it is complete.