DuPont to sell car paint unit to Carlyle for $4.9 billion

(Reuters) - DuPont Co struck a deal to sell its slow-growing car paint business to investment firm Carlyle Group LP for $4.9 billion cash as it seeks to focus on higher-growth areas such as agriculture and nutrition.

A sale of the performance coatings unit to Carlyle, one of private equity's top investors in industrial companies, allows DuPont to cut debt and better positions it for acquisitions in priority sectors such as advanced materials and biotechnology.

"The coatings marketplace has consolidated greatly over the last few years. Our business -? to continue to invest and be competitive -- with Carlyle will have a better future," DuPont Chief Executive Ellen Kullman told analysts on a conference call.

The sale caps a nearly eight-month-long auction of the car paint unit, which has 11,000 employees and is expected to generate revenues of more than $4 billion this year. The transaction is expected to close in the first quarter of 2013, subject to regulatory approvals, Dupont said.

DuPont's performance coatings business primarily sells to Maaco and other auto paint refinishers. Ford Motor Co and General Motors Co are also key customers, although selling to so-called original equipment manufacturers is not as lucrative.

Washington, D.C.-based Carlyle outbid Apollo Global Management LLC and a consortium of KKR & Co LP and Onex Corp , which also submitted final bids in July, people familiar with the matter previously told Reuters.

Reuters on Wednesday reported that DuPont was nearing a deal to sell the business to Carlyle this week.

DuPont said it will still generate more than $3 billion through sales of advanced materials to the auto industry. As part of the transaction, Carlyle will assume $250 million of DuPont's unfunded pension liabilities.

"We're going to look to strengthen that balance sheet and then we will look to execute against our financial principles, which I've talked about is around taking any excess cash and providing that back to shareholders unless we have a compelling investment opportunity within the company," DuPont Chief Financial Office Nicholas Fanandakis said.

The deal values the car paint business at 7.8 times its estimated 2012 earnings before interest, tax, depreciation and amortization.

The performance coatings business had a net cost basis of about $2 billion and the full cost benefit of the divestment is expected to be seen by the fourth quarter of 2013, DuPont added.

DuPont shares were down slightly in late morning trading on Thursday, off 0.7 percent to $49.61, in line with broad losses for equities.

FLUSH WITH CASH

"DuPont Performance Coatings is a technology innovator and we look forward to building on its strong market presence to accelerate growth in emerging markets, particularly in China and Brazil," Gregor Böhm, co-head of Carlyle's European buyout team, said in a statement.

Buyout firms, flush with capital they are looking to put to work and backed by readily available financing for leveraged buyouts, have been snapping up assets being carved out of conglomerates.

Carlyle has been particularly active of late, committing $1 billion in private equity in the second quarter and announcing deals since then for which it will commit at least $1.6 billion, co-Chief Executive William Conway said on August 8.

In July, Carlyle and BC Partners agreed to buy industrial businesses of United Technologies Corp's Hamilton Sundstrand subsidiary for $3.46 billion. Earlier this month Carlyle announced a $3.3 billion deal to acquire photo agency Getty Images.

Carlyle has a long track record of dealmaking in the automotive and industrial sectors. Its previous and current investments include Allison Transmission , car rental company Hertz Global Holdings , chemicals maker PQ Corp, and regional rail freight operator Genesee & Wyoming .

Carlyle Partners V, a $13.7 billion U.S. buyout fund, and Carlyle Europe Partners III, a 5.4 billion euro European buyout fund, will provide equity financing for the investment.

Much of Carlyle's prolific dealmaking in recent months has been related to Carlyle Partners V, which the private equity firm is still putting to work. The fund's investment period runs through May 2013, Conway has said.

Earlier this year, Carlyle Partners VI, the firm's sixth flagship U.S. private equity fund, which has a target of $10 billion, raised its first $2 billion from investors after launching in January, a source familiar with the matter told Reuters in June.

Credit Suisse and Greenhill & Co advised DuPont on the car paint unit sale. Credit Suisse, alongside Barclays , Citi and Deutsche Bank provided financing to Carlyle for the deal.

(Reporting by Soyoung Kim, Michael Erman and Greg Roumeliotis in New York and Swetha Gopinath in Bangalore; Editing by Saumyadeb Chakrabarty, John Wallace and Tim Dobbyn)

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