Akzo seeks US$30b merger
Group says it’s in ‘constructive talks’ with smaller US rival Axalta
AMSTERDAM: Dutch paints maker Akzo Nobel, under pressure after rejecting a lucrative takeover offer and two profit warnings, has confirmed merger talks with smaller US rival Axalta Coating Systems Ltd to create a US$30bil company.
Akzo, the maker of Dulux paint, announced it was in “constructive talks” about a “merger of equals” in what would be the first major deal by chief executive Thierry Vanlancker, who took over in July after Akzo spurned a
26bil (US$30.2bil) takeover offer from US rival PPG Industries.
Reuters reported last Friday that Akzo had approached Axalta about a possible merger, sending Axalta’s shares 17% higher.
Akzo underlined in a brief statement that the talks would not affect its decision to sell its
8bil-€ Chemicals Divisions, valued at 10bil. It reiterated promises to return the “vast majority” of proceeds to shareholders.
Akzo has a market capitalisation of 19.5bil (US$22.7bil), while Axalta is worth US$8.1bil at Friday’s closing price of US$33.15.
Akzo said merging with Axalta, whose truck coatings business fills a hole in its portfolio, would “create a leading global paints and coatings company.”
Vanlancker has been forced to cut targets made in the heat of the takeover battle twice in the space of six weeks, blaming disruption caused by hurricane Harvey, rising raw materials costs and “headwinds” at its marine coatings business.
Akzo also faced lawsuits earlier this year from shareholders angry over its decision to reject PPG.
Akzo shares were 0.7% lower at 76.93 at 0900 GMT, well below a figure of around 96 proposed by PPG.
Analysts from Bernstein said in a note the deal is a “sensible” idea, combining the No. 3 and 4 players. The new company would trail the Sherwin-Williams/Valspar combination and PPG globally.
An Akzo-Axalta merger “would improve scale and density in segments and countries where needed while taking out costs, most likely in the fragmented general industrial segment and in Europe,” they said.
They forecast savings of around from combining operations.
Analyst Joost van Beek of Theodoor Gilissen said the timing of the Axalta deal would be difficult, and Akzo’s management is under pressure to pull it off.
“There is a large risk that Akzo will pay too much, as it is clear that they want to stay out of the hands of PPG, and Axalta knows that.”
Akzo did not disclose how it is considering structuring the deal, though promises to return proceeds from the chemicals division 250mil sale to shareholder and describing the deal as a merger suggests Akzo may pay mostly with shares. A spokesman declined comment beyond the statement confirming talks.
Sources familiar with the matter told Reuters last Friday that talks were at an early stage and there was no guarantee the companies would come to an agreement.
Akzo said it would sell the Specialty Chemicals division, which represents a third of its sales and profits, as it attempted to avoid a takeover by PPG.
Akzo has also committed to return at least 1bil extra to investors this year via a special dividend, in advance of the division sale. — Reuters
Giant in the making: An employee handling empty Dulux paint pots at Akzo Nobel’s factory in Ashington, UK. Akzo says merging with Axalta, whose truck coatings business fills a hole in its portfolio, will create a leading global paints and coatings company. — Bloomberg