Coatings company to seal sevenfold return for Bain

Buyout firm Bain Capital is set to make more than seven times its initial investment in Dutch paint company SigmaKalon after granting a US-based trade rival exclusivity to proceed with a €2.2bn ($3bn) bid.

PPG, a US coatings and paints manufacturer, fought off competition from four buyout firms and another trade player in the hotly contested auction for SigmaKalon, according to sources. The six bidders had been working on their final offers since July 9.

The price was higher than the initial €1.8bn to €2bn valuation sources indicated Bain had targeted at the start of the process.

If PPG's bid clears the necessary regulatory hurdles, Bain will have made more than seven times its money on SigmaKalon in four years.

Bain acquired SigmaKalon in 2003 for about €1bn, when the company was spun out of TotalFinaElf.

Sources close to the firm said the deal would generate an internal rate of return in excess of 150%.

Bain has increased revenues at the company from about €1.7bn in 2003 to about €2bn last year.

PPG said the acquisition of SigmaKalon would give it a foothold in the European market, where it only has a nominal presence at the moment, and allow it to expand into Southern and Central Europe, Africa and Asia.

Paris-based buyout firms LBO France and PAI Partners, UK-based BC Partners, and US firm Warburg Pincus all reached the final round of the auction, submitting bids earlier this week.

US paint company Sherwin Williams was the only other trade player involved in the auction's latter stages.

Private equity firm Cinven withdrew from the bidding earlier in the auction. Valspar Corporation, another paint manufacturer which had been mooted as a possible bidder, was not among the final round bidders, according to a source.

The auction was run by UBS and HSBC. The pair will provide staple financing for the deal, along with ING. Lazard is advising PPG.