Axalta CEO Says Offsets Held The $600 Million Synergy Floor For The AkzoNobel Merger
Chris Villavarayan said executives used headroom to keep the $600 million target as two divestitures come out of the combination.
Axalta Coating Systems, which makes paints and finishes for vehicles and industrial products, is holding its roughly $600 million annual cost-synergy target for its planned combination with AkzoNobel even after two regulatory divestitures, CEO Chris Villavarayan said on the company's third-quarter earnings call Thursday. Management found offsets, he said, after sales were pulled from the deal.
Headroom absorbed the remedies
A BNP Paribas analyst said the two remedy packages account for roughly half a billion of sales and asked whether synergy headroom had been used to keep the $600 million unchanged. Villavarayan said it was the headroom the companies had.
Executives had always talked about a floor, he said, quoted in the transcript as "$600 billion floor" — a slip for million. They aimed for something higher, and when the regulators' process led to the removal the analyst described, "we were able to find offsets."
CFO Carl Anderson said the company remains confident in about $600 million of annual run-rate cost synergies, with roughly 90% captured within the first three years after closing. He also pointed to meaningful revenue-synergy opportunities from cross-selling, technology sharing and wider customer access.
Two-thirds cleared, close targeted for early 2027
Anderson said regulatory clearance has been secured in two-thirds of the required jurisdictions. The sales of AkzoNobel's European refinish business and Axalta's North America building products business are underway, and he called those the only two remedies both companies are working on. The company expects to close in early 2027.
Separately, Villavarayan said Axalta's wood coatings business has its own manufacturing and a standalone profit and loss, so it can be split out quickly. The process started a month earlier, he said, and the company is working through second-round bids.
After closing, the combined company, named earlier this month, will trade on the New York Stock Exchange under the ticker AXZ, Villavarayan said.
A quarter below plan
The call also carried a guidance cut. Third-quarter net sales rose 2% to $1.3 billion, but results fell short of management's expectations on softer European refinish volumes. Adjusted EBITDA was $282 million, a 4% decline, and Anderson now sees full-year adjusted EBITDA of $1.1 billion to $1,110 million.
Free cash flow was $92 million, up 3%, even after about $21 million of merger-related cash costs. Anderson put full-year free cash flow at about $450 million, citing lower EBITDA and higher deal costs as closing nears.
Anderson said fourth-quarter adjusted EBITDA should land between $254 million and $264 million, with adjusted earnings of about $0.55 a share.
Sources
- Axalta Coating Systems (AXTA) Q3 Earnings and Revenues Miss Estimates — Yahoo Finance
- Axalta Coating Systems: Q3 Earnings Snapshot – WTOP News — wtop.com
- Axalta Coating Systems misses top-line and bottom-line estimates;gives Q4 and updates FY26 | Seeking Alpha — seekingalpha.com
- Axalta Releases Third Quarter 2026 Results — globenewswire.com
