Fund takes legal action to oust Akzo chairman

AMSTERDAM: Elliott Advisors, the hedge fund that has been pushing Dutch paint maker Akzo Nobel NV to enter takeover talks with US peer PPG Industries Inc, said yesterday that it had launched legal action to try to oust Akzo chairman Antony Burgmans.

In an open letter, the fund said Akzo’s rejection of PPG’s third takeover proposal, worth €26.3 billion ($28.7 billion), was “a flagrant breach of Akzo Nobel’s boards’ fiduciary duties and of Dutch corporate law, and ... an arrogant dismissal of recognised principles of proper corporate governance.”

Akzo has said PPG’s bid is too low and lacks firm commitments to the company’s stakeholders, including employees and environmental interests.

The company’s boards prefer their own plan to avoid a PPG takeover by issuing extra dividends and selling or floating Akzo’s chemicals division, representing about a third of profit.

Elliott said it had filed a suit with Amsterdam’s Enterprise Chamber petitioning judges to order an extraordinary general meeting (EGM) of shareholders to debate Burgmans’ dismissal.

Under Dutch law, shareholders representing a 10% stake have the right to ask the company to call an EGM. Elliott, with a 3.25% stake, had earlier assembled a group of investors meeting the threshold and requested Akzo call such a meeting. The company declined, saying it supported Burgmans and an EGM would not be in its best interests.

Akzo spokesman Leslie McGibbon said Elliott’s decision to go to court was “incredibly disappointing.”

“We’ve conducted an extremely thorough review of all proposals from PPG, including engagement” between Burgmans and PPG CEO Michael McGarry “exactly as Elliott requested,” he said, adding Akzo’s handling of PPG’s proposals had followed Dutch corporate governance rules.

Elliott’s legal fight complicates the timeline for the Akzo-PPG takeover struggle.

PPG faces a June 1 deadline to make a formal bid for Akzo or walk away for a six month cool-down under Dutch securities law. PPG has implied it will make a bid, though if it has not won support from Akzo’s boards, the bid will be considered hostile.

Successful hostile takeovers of Dutch companies by foreign buyers are extremely rare, and face an array of difficulties, not least Akzo’s poison pill powers to thwart unwanted suitors, which date from 1926.

In addition, politicians have said they oppose a takeover of Akzo.

A hearing date for Elliott’s complaint has not been set. If judges rule in the fund’s favor, the minimum period before which an EGM can be held is 15 days.