Farrow & Ball sold to Danish paint group Hempel in £500m deal

Farrow & Ball, the upmarket British paint company known for its eccentrically-named hues, is being sold to the Danish coatings manufacturer Hempel in a £500 million (€580 million) deal that is set to trigger a sales push outside the UK.

The company, whose paints include ‘Skimmed Milk White’, ‘Broccoli Brown’ and ‘Dead Salmon’, has been owned by Los Angeles-based private equity firm Ares since 2014. Ares paid £275 million for the acquisition.

The deal comes after a year in which protracted lockdowns and a shift to working from home have made some consumers more willing to spend on high-end interior design.

Anthony Davey, chief executive of Farrow & Ball, said revenues had risen more than 30 per cent in the year to March 2021.

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“The home turned into a new frontier,” he said. “It was a school, it was an office, it was a place where old hobbies were revisited and new hobbies began. As a consequence people invested more time and more money [in their homes].”

The company repaid more than £1 million furlough money to the UK government when it realised “we were actually going to have a very, very strong year”, Davey said.

Deal

The deal values Farrow & Ball at almost £500 million, according to people familiar with the matter, although the companies declined to comment on the valuation.

Hempel, based in Lyngby, outside Copenhagen, produces paints and coatings for large container vessels, bridges and wind turbines. Decorative paints for homes, offices, schools, hospitals and public buildings made up a third of its revenue in 2020. The deal is part of its plan to double its revenue to €3 billion by 2025.

“We believe there’s an international scaling possibility here,” said Lars Petersson, Hempel’s chief executive. “We keep investing in the UK. . .but, of course, there are some limitations [on sales growth]. Outside of the UK, there are no limitations.”

Non-UK sales could account for “at least half” of Farrow & Ball’s revenues, he said. Last year, 39 per cent were outside of the UK, its accounts show. The company will continue to manufacture all of its paint in the UK because this was “a key part of the brand”, Petersson said.

Farrow & Ball’s revenues rose to £87 million in the year to March 2020, up from £83.6 million the previous year, according to its latest published accounts. However, it made a pre-tax loss of £27 million, partly because of net interest charges of £35.6 million linked to its private equity acquisition.

The company has sought to attract younger consumers by hiring social media staff from fast-fashion companies “where online social inspiration is the lifeblood of that industry”, said Mr Davey.

Consumers

“Not all Farrow & Ball consumers are sort of uber-affluent consumers – very far from it,” he said. “Of course, affluence and price sensitivity plays a role, but it is not the defining factor. It’s their engagement and passion for interior design.”

The company had gone through a “really painful process” to make sure it could continue to export its paints, which are manufactured at its factory in Wimborne, Dorset, to the EU after Brexit, he added.

It is still storing its paint at a new distribution centre in Germany in case of problems at the border. – Copyright The Financial Times Limited 2021