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Investing.com -- S&P Global Ratings has upgraded Axalta Coating Systems Ltd. to ’BB+’ and placed the company on CreditWatch Positive following its planned merger with Akzo Nobel N.V.
The all-stock merger of equals would create the second largest global coatings company behind Sherwin Williams, with approximately $17 billion in annual sales and $3.3 billion in EBITDA for 2024, including synergies. The combined entity would surpass both PPG and Nippon Paint in size.
Under the merger agreement, Akzo Nobel shareholders will retain 55% of the combined company, while Axalta shareholders will hold 45%. The Netherlands-domiciled company will maintain dual headquarters in Amsterdam and Philadelphia.
The merger is expected to strengthen Akzo’s market positions, particularly in Europe and the United States. The combined company’s revenue breakdown shows 43% from Europe, the Middle East, and Africa; 24% from Asia-Pacific; 23% from North America; and 10% from Latin America.
By product segment, the combined entity will derive 27% of sales from Decoratives, 18% from Industrials, 18% from Refinish, 13% from Mobility, 12% from Powder, 10% from Marine & Protective, and 2% from Aerospace.
S&P Global Ratings expects the deal to boost Akzo’s profitability over time, with adjusted EBITDA margins potentially rising to 19%-20% during the next two years. The companies have identified $600 million in synergies to be realized through 2029, which would align profitability with top industry performers.
The transaction is expected to close in late 2026 to early 2027, pending regulatory, antitrust, and shareholder approvals. A special cash dividend of €2.5 billion will be paid to Akzo Nobel shareholders, less any regular dividends paid in 2026 before the transaction finalizes.
Axalta has suspended its share buyback program following the merger announcement. The company had previously indicated plans to repurchase $250 million of shares in the fourth quarter of 2025, exceeding the $165 million spent during the second and third quarters combined.
Despite recent volume challenges, Axalta has maintained strong operational performance. The company reported that refinish sales were down 7% in the third quarter, though still outperforming the market. Axalta secured approximately 2,200 new body shop wins through the first nine months of 2025, approaching its typical annual figure of 2,400.
In the mobility segment, commercial vehicle sales decreased 7% in the third quarter, comparing favorably to the industry-wide decline of roughly 30% in class 8 volumes.
Axalta has already achieved $60 million-$70 million of incremental cost savings against its $75 million target for its transformation initiative and expects approximately $20 million to flow through into 2026.
S&P Global Ratings anticipates volume growth could resume beyond the second quarter of 2026 as the refinish business stabilizes. The rating agency expects EBITDA margins to remain above 20% with solid credit metrics and strong free cash flow generation.
The CreditWatch placement will be resolved when further details about the capital structure become available and the merger transaction is completed.
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