A report from Bloomberg says that the Carlyle Group LP (NASDAQ:CG) has announced their agreement to purchase DuPont’s auto paint division. The purchase is reportedly worth $4.9 billion, and will give control of the auto coating unit to the second largest private equity firm in the world.
This sale would mark the exit of one of the most well known names in the auto paint industry. This industry is one which DuPont has served, ever since the advent of the car. DuPont’s ability to grow revenue from the auto industry has been limited of late, as auto makers in the U.S. have still not fully rebounded to the numbers they were posting before the recession. On the other hand, the cost of titanium oxide, a raw material necessary for the paint, has continuously inflated, leaving the company less profit margin in the painting industry.
The explosive growth of Henry Singleton's Teledyne
Henry Singleton’s Teledyne is one of the greatest business success stories there is. The conglomerate was born in the early 60s by the acquisition of a single company with less than $1 million in revenue. Over the next 15 years, Henry Singleton acquired around 125 (or 145 or 130 there are several different estimates) other companies Read More
The CEO of DuPont, Ellen Kullman, has stated that they will be focusing on other areas, which are more profitable. These areas will include the food industry and also bio fuel. They have been planning for some time to sell the auto paint division, and had contracted Credit Suisse Group AG (ADR) (NYSE:CS) back in October to help them seek buyers for the unit.
The move towards food and bio fuel, only underscores a trend which many companies are following these days. The pressure to become more “green” and use less energy derived from fossil fuels, has opened a whole new line of revenue for those who have the capital to invest in research and development of these new sources of energy. DuPont has definitely made steps towards this field, as last year they purchased Danisco A/S, a food ingredient and bio fuel enzyme supplier.
The Carlyle Group LP (NASDAQ:CG) is, as we noted above, the world’s second largest investment group. They are topped in AUM, only by The Blackstone Group L.P. (NYSE:BX). It will be interesting to see what their plans are for the DuPont paint unit, and whether they can bring the profit margin back up to where it needs to be.