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TPG-Axon Opens a New Position in Axalta Coating

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TPG-Axon’s holdings in Axalta Coating Systems

TPG-Axon Management initiated a new position in Axalta Coating Systems Ltd (AXTA) by purchasing 2,409,701 shares of the company, representing 4.7% of the fund’s 4Q14 portfolio. The stock is also part of the iShares Russell Midcap Growth ETF (IWP) with an exposure of 0.03%.

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Overview of Axalta Coating Systems

Axalta Coating Systems offers paint and coatings systems. The company is involved in the design of coatings for electric motors, commercial vehicles, pipelines, buildings, automotive refinish, and light vehicle OEMs (original equipment manufacturers).

Asset management and private equity firm Carlyle Group LP (CG) purchased the business in 2013 from E.I. du Pont de Nemours and Company (DD). Carlyle paid $4.9 billion for DuPont Performance Coatings.

Two segments

Axalta Coating Systems (AXTA) operates its business through two segments: Performance Coatings and Transportation Coatings. Each segment serves two end markets, resulting in four business areas overall.

  • Performance Coatings – Through this segment, Axalta offers high-quality powder and liquid coating solutions to a local and fragmented customer base. The end markets for this segment are Industrial and Refinish.
  • Transportation Coatings – Through this segment, Axalta offers advanced technologies of coating to original equipment manufacturers of commercial and light vehicles.
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Axalta Coating’s successful IPO

Axalta Coating Systems raised approximately $975 million in its IPO (initial public offering) in November 2014. Since going public, the price of Axalta’s shares has gone up by 50% in less than six months.

Berkshire Hathaway to buy Axalta shares

According to a company press release on April 7, 2015, Berkshire Hathaway has entered into an agreement to purchase 20 million Axalta common shares for $560 million. Berkshire Hathaway also agreed not to sell the shares over a 90-day period following the completion of the sale. The purchased shares represent a stake for Berkshire Hathaway of 8.7% in Axalta.

Healthy financial performance

During 4Q14, Axalta’s net sales rose to $1.08 billion, representing a 5.1% increase. This excluded currency effects over the prior year period. Sales for the company’s Performance Coatings segment amounted to $640 million, a 6.3% rise excluding currency effects over 4Q13.

Sales for the Transportation Coatings segment amounted to $438 million, a 3.2% rise excluding currency effects over 4Q13 figures. Adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) was $205 million in 4Q14, representing a margin of 19%. It was the seventh straight quarter of year-over-year growth for the company.

In the next part of this series, we’ll look at TPG-Axon Management’s new stake in IMS Health Holdings Inc. (IMS).

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