Sadolin Paints East Africa Limited is set to stop using the household name in manufacturing its paint following termination of a deal it had with Dutch company Akzo Nobel Coatings International BV, which owns the trademark.
Akzo in February sent a one year notice to Sadolin Paints East Africa, indicating that the licence agreement with the local firm would come to an end on February 1, 2018, instead of the original December 31, 2019, date.
Akzo owns the Sadolin Paints trademark but has been engaging the local firm to manufacture and sell paints under the trade name in return for royalties.
The Dutch firm now intends to set up shop in Kenya, and has incorporated a Kenyan subsidiary to take over manufacture and sale of Sadolin Paints in the region.
Under the deal, Sadolin Paints East Africa Limited was to manufacture and sell paint with the trade name in Kenya, Uganda, Rwanda, Tanzania, Zanzibar, Burundi, South Sudan, Ethiopia, Democratic Republic of Congo (excluding Kinshasa and Lubumbashi), Somalia and Djibouti.
Details of the termination have emerged in a suit Sadolin Paints East Africa Limited has filed against Akzo seeking to stop the Dutch firm from prematurely terminating the contract between the two companies.
Akzo is yet to respond to the suit.
Sadolin Paints East Africa Limited also wants to stop Akzo from soliciting for business from the Kenyan firm’s client base.
The company has enjoined ICI South Africa PTY, a South African subsidiary of Akzo, in the suit.
“The respondents obviously intent on frustrating Sadolin Paints East Africa Limited has notwithstanding the termination notice proceeded to incorporate another company christened Akzo Nobel Kenya and is in the process of issuing it with a licence for the use of its trademarks to manufacture, distribute and sell similar products in East Africa just like Sadolin Paints East Africa Limited,” Sadolin Paints chairman Salim Alibhai says.
The move comes in the wake of Japanese paint and coatings manufacturer Kansai Paint’s acquisition of Sadolin Paints East Africa’s operations for a fee said to be in the region of $125 million (Sh12.5 billion).
The Competition Authority of Kenya in May approved the acquisition.
Sadolin Paints East Africa says it has opened arbitration proceedings with Akzo but wants the court to bar the Dutch firm from prematurely terminating the lucrative deal.