Commentary: Has the Time Finally Come for Berkshire to Cash Out of Axalta?

(BRK.A), (BRK.B)

Has the time finally come for Berkshire Hathaway to cash out of its minority position in Axalta?

Back in 2015, Berkshire Hathaway acquired roughly 10% minority stake in Axalta Coating Systems from The Carlyle Group for $560 million, or $28.00 per share. Axalta is a leading global coatings provider for vehicles and industrial applications.

Since that time it’s watched its investment flounder, as the Philadelphia-based Axalta fought off being acquired by PPG, and spurned another potential merger with Dutch coatings company Akzo Nobel.

Nippon Paint was another company that was interested in Axalta, only to have the company reject a $9.1 billion all-cash bid that it made near the end of 2017.

2017 was also a year of internal turmoil for the company. Axalta parted ways with its newly hired CEO, Terrence Hahn, after only five weeks on the job. The dismissal came after an internal investigation turned up conduct that Axalta “believes was inconsistent with company policies.”

Chief financial officer Robert Bryant took over as CEO and remains in that position today.

Apparently, Axalta was a company unwilling to be taken over by anyone.

Now, Axalta finally seems ready to enhance shareholder value, and a takeover has become more likely.

“Axalta’s Board is committed to maximizing value for all shareholders and has initiated a comprehensive review of strategic alternatives, including a potential sale of the Company, changes in capital allocation, and ongoing execution of our strategic plan,” according to Axalta director Mark Garrett.

With a sale of the company finally on its board’s agenda, could this be the time for Buffett to finally get something for his investment?

Nippon Paint, PPG, and Akzo Nobel are all among the potential players, and the market has quickly recognized that this time may finally be different for Axalta.

Axalta (AXTA) closed on Friday at $29.99, making Berkshire’s stake worth $727,677,360. And it’s now trading above its 52-week high of $30.94 in Friday’s after-hours trading.

Hopefully there’s more good news to come.


© 2019 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.