IPO Report: Axalta Coating Systems (AXTA)

Axalta Coating Systems (AXTA) is a leading global manufacturer, marketer and distributor of high performance coatings systems. It is based in Hamilton HM 11, Bermuda.

Nine other new companies are scheduled for the week of Nov. 10, 2014. The full IPO calendar is available at IPOpremium.

SEC Documents

Manager, Joint-managers: Citi, Goldman Sachs,Deutsche Bank, J.P. Morgan, BofA Merrill Lynch, Barclays, Credit Suisse, and Morgan Stanley.

Co-managers: Jefferies, UBS Investment Bank, Baird, BB&T Capital Markets, Nomura, and SMBC Nikko.

End of lockup (180 days): Monday, May 11, 2015

End of 40-day quiet period: Monday, December 22, 2014

AXTA scheduled an $877 million IPO with a market capitalization of $4.5 billion at a price range midpoint of $19.50 for Wednesday, Nov. 12, 2014 on NYSE.

Axalta Coating Systems IPO Report

Summary

AXTA is a leading global manufacturer, marketer and distributor of high performance coatings systems. AXTA generates approximately 90% of its revenue in markets where AXTA holds the #1 or #2 global market position, including the #1 position in its core automotive refinish end-market with approximately a 25% global market share.

Valuation

Glossary

Conclusion

Positive

P/E 38, price-to-sales 1.0

Rev  +3%, gross profit +12%

8.2% operating profit, 2.7% after-tax profit

Operating profit +45%, proforma, means the PE firm has squeezed  the income statement pre-IPO

AXTA holds the #1 or #2 global market position

Business

AXTA is a leading global manufacturer, marketer and distributor of high performance coatings systems. AXTA generates approximately 90% of its revenue in markets where AXTA holds the #1 or #2 global market position, including the #1 position in its core automotive refinish end-market with approximately a 25% global market share.

AXTA has a nearly 150-year heritage in the coatings industry and are known for manufacturing high-quality products with well-recognized brands supported by market-leading technology and customer service.

 Over the course of its history AXTA has remained at the forefront of its industry by continually developing innovative coatings technologies designed to enhance product performance and appearance, while improving customer productivity and profitability.

AXTA’s diverse global footprint of 35 manufacturing facilities, 7 technology centers, 45 customer training centers and approximately 12,650 employees allows AXTA to meet the needs of customers in over 130 countries.

 AXTA serves its customer base through an extensive sales force and technical support organization, as well as through over 4,000 independent, locally-based distributors. AXTA’s scale and strong local presence are critical to its success, allowing AXTA to leverage its technology portfolio and customer relationships globally while meeting customer demands locally.

Growth plan

AXTA has renewed the organization’s focus on profitable growth, achieving year-over-year net sales and Adjusted EBITDA growth for each of the five full quarters following the Acquisition.

Additionally, AXTA has undertaken several transformational initiatives that AXTA believes have laid the foundation for future growth, resulting in significant new business wins, many of which AXTA expects to contribute to sales beginning in 2015.

AXTA has also begun implementing several EBITDA enhancement initiatives that AXTA believes will drive meaningful earnings growth over the next several years.

Large Debt:

Balance sheet debt to equity ratio of 3.25, very high, means high interest payments.

As of June 30, 2014, AXTA had cash of $350 million and outstanding indebtedness of $3,901 million, which may limit the availability of financial resources to pursue its growth initiatives.

For the LTM Period, AXTA’s net sales were $4,342 million, Adjusted EBITDA was $799 million, or 18.4% of net sales, and net income was $12 million.

Intellectual property

As of June 30, 2014, AXTA had a portfolio of over 1,300 issued patents and over 500 pending patent applications, as well as more than 250 trademarks, and AXTA actively applies for patents and trademarks on new products and process innovations. In addition to protecting its technology with patents, AXTA has a rich portfolio of proprietary technical knowledge, giving AXTA a valuable competitive advantage in the industry.

Competition

AXTA’s primary competitors in the refinish end-market include PPG, BASF and Akzo Nobel, but AXTA also competes against regional players in local markets.

Similarly, in industrial coatings, AXTA compete against multi-national suppliers, such as Akzo Nobel, PPG, Valspar and BASF, and regional players in local markets.

AXTA is one of the few performance coatings players that can provide the customer service, technology, color design capability and product performance necessary to deliver exceptional value to its customers.

5% shareholders pre-IPO

Investments funds affiliated with The Carlyle Group   98%

Dividends

No dividends are planned.

Use of proceeds
AXTA will not receive any proceeds from this IPO.  100% to shareholders