DuPont announced October 29 that it has agreed to acquire Herberts, the coatings company of Hoechst AG, for $1.89 billion (DM 3.13 billion). The acquisition, pending government approvals, would create the world’s third largest coatings company and the leading automotive coatings supplier with combined sales of $3.7 billion.

"This acquisition is consistent with DuPont’s intent to establish global leadership positions in our core businesses through selective investments that capitalize on attractive cost positions and technology synergies," said DuPont President and Chief Executive Officer Charles O. Holliday, Jr. "This action is similar to those we have taken recently to build stronger global positions for our Lycra elastane and titanium dioxide businesses. The Herberts acquisition will enable our automotive coatings business to increase its contribution to shareholder value."

"The fit between Herberts’ and DuPont’s automotive coatings businesses is exceptional," said Louis F. Savelli, president of DuPont Automotive. "The merger of complementary assets, technology and regional market strengths will create a much stronger business that can grow profitably and better serve customer needs on a global basis."

DuPont is the leader in automotive coatings in both North and South America. Herberts is the leading supplier of automotive coatings in Europe. Combining the two companies’ resources will lead to faster development of new technologies and markets in the developing regions, according to Savelli.

Each company has developed new technology in environmentally acceptable products such as low-emission waterborne and powder coatings as well as products that contain no hazardous air pollutants. Concurrently, research continues to develop more durable coatings that resist scratches and acid-etch environmental damage.

DuPont Automotive has nine manufacturing facilities, six of which are in North America, three in Europe, and joint in South America and the Asia/Pacific region. Herberts operates 37 manufacturing facilities, 30 of which are located in Europe, three in North America, one in South America and three in Asia with a number of minority interest joint ventures in the Asia/Pacific region. Combined, DuPont Automotive and Herberts currently employ 14,000 people.

On October 16, Hoechst had announced that the agreement to sell coatings manufacturer Herberts, GmbH of Wuppertal, Germany to Kohlberg, Kravis, Roberts & Co, originally announced in August, had been terminated.

Reported in the September issue of INSIGHT, KKR was to have purchased all of Herberts for DM 3 billion (Approximately $1.7 billion.)

Herberts operates four divisions: Automotive Systems (OEM paints), Automotive Refinishes, Powder Coatings and liquid Industrial Coatings. The company is the market leader in Europe, which accounts for 80 percent of total sales.

Due to the increasing internationalization of its customer base, Herberts began expanding its presence in the Americas and Asia in the early 1990s, launching American Standox in a joint venture with Sherwin-Williams. Herberts acquired Sherwin-Williams’ stake in American Standox earlier this year and now operates that business as a wholly-owned subsidiary.

Also, Herberts acquired the U.S. distribution business of their Spies Hecker brand in the early 1990s.

Although the sale of Herberts had been anticipated since the announcement late last year that Hoechst was to focus its business on life sciences, the deal with KKR surprised many in the industry.

In last month’s issue of INSIGHT, we incorrectly stated in an Editor’s Note that PPG would hold a party. That Editor’s Note was a correction to a news article on the INSIGHT On-Line website stating they would not hold a party.

For the record, PPG will not have a party.

On September 12, the Automotive Service Association (ASA) Board of Directors voted to initiate a new structure which gives individual ASA members the freedom to choose their level of membership. In addition, state affiliates of ASA have been asked to sign a new affiliate agreement that goes into far greater detail, restricting activities of affiliate groups in many cases.

Currently, individual shops who elected to join ASA are mandated to join at all membership levels available in their geographic region. For example, a shop in a large metropolitan area that has an ASA chapter and a state affiliate, must join all three organizations. Under the new program, that same shop will be free to join at any or all levels in their region.

ASA is sending letters of explanation to all of its members outlining the new choice benefits. The cost of national dues will not be affected by this action and will remain $150.

The new affiliate agreement which according to press reports was to be signed by the affiliates by November 16th, has provoked strong criticism from 16 state affiliates of ASA including:

ASA-Albuquerque;

ASA Arizona/Tucson;

ASA-Florida;

ASA-Georgia;

ASA-Greater Kansas City;

ASA-Illinois/Mechanical;

ASA-Indiana;

ASA-Maine;

ASA-Massachusetts/Rhode Island;

ASA-Michigan;

ASA-Minnesota;

ASA-Missouri;

ASA-New Jersey;

ASA-Pennsylvania;

ASA-South Carolina; and

ASA-Texas.

In a letter from Jim Bastone, president of ASA-Pennsylvania and representing the above organizations, the affiliates called for a reconsideration of the proposed agreement or the protesting affiliates would be forced to call for the resignation of the Board at the next annual meeting.

Another vocal critic of the agreement is Dennis Liphart, executive director of ASA-Michigan, and in the past a critic of organizations that do not support ASA National. Two years ago, Liphart wrote a scathing rebuke of Mike Melfi and members of ASA-Illinois that faced disaffiliation due to stands the group had taken in opposition to ASA National. In the November/December issue of ASA Michigan’s magazine, Liphart apologizes to Melfi, now feeling that the situation two years ago was an indicator of things to come from ASA National.