Nippon Paint foils Akzo-Axalta party
Japanese firm makes all-cash counteroffer
NEW YORK/AMSTERDAM: Nippon Paint Holdings Co Ltd made an all-cash offer on Tuesday to acquire US coatings company Axalta Coating Systems Ltd, two people familiar with the matter said, ending merger talks between Axalta and Dutch peer Akzo Nobel NV.
Nippon Paint confirmed that it has made “a proposal” to Axalta but declined to give details, adding there “is no assurance the two will reach any agreement.’’
Axalta and Akzo Nobel said earlier on Tuesday that they had ended negotiations about a “merger of equals” because they were unable to reach terms.
Axalta, whose largest shareholder is Warren Buffett’s Berkshire Hathaway Inc, said it continued to pursue other “valuecreating alternatives” although it did not disclose Nippon Paint’s role, if any, in the termination of the discussions.
Nippon Paint, Japan’s biggest paint supplier and 39% owned by Singapore-based investment company Wuthelam Holdings Ltd, made the all-cash offer at a premium to where Axalta shares ended on Monday at $33.54, one of the sources said.
The offer was credible enough for Axalta to end negotiations with Akzo Nobel, the source added.
It was not clear how far the negotiations with Nippon Paint would progress, and Axalta could also choose to engage in deal talks with other interested parties, the second source said.
Axalta has a market capitalisation of $8.2 billion while Nippon Paint has a market capitalisation of 1.2 trillion yen ($10.7 billion).
Nippon Paint shares fell 4.5% to 3,535 yen yesterday morning before trade was suspended in the wake of the Reuters report. The Osaka-based company has previously expressed a desire to expand in the United States and Europe to become a “global paint major”.
Axalta shares reversed l osses i n extended trading hours in New York after Reuters reported on Nippon’s offer, to trade up 3.3% at $35.01.
For Akzo Nobel, the breakdown in the talks with Axalta marks the end of a difficult year in which it rejected a €26 billion ($30.5 billion) takeover offer from PPG Industries Inc, in favour of a standalone plan.
Based on Dutch takeover rules, PPG could return with a new offer as early as next month. However, PPG CEO Michael McGarry has indicated his company is no longer interested after Akzo Nobel spurned three offers in March and April.
Akzo Nobel said in a statement it would now continue to pursue that strategy of selling or seeking a stock market listing for its specialty chemicals division, which has an estimated value of up to €10 billion.
The company promised to return the vast majority of proceeds to shareholders.
The failure of the talks comes days before Akzo Nobel’s shareholders are to meet on Nov 30 to approve the demerger of its specialty chemicals arms.
Since PPG walked away in June, former Akzo Nobel CEO Ton Buechner and former CFO Maëlys Castella have resigned, citing health reasons, while chairman Antony Burgmans is due to retire in April.
Akzo Nobel’s new CEO, Thierry Vanlancker, said in a statement on Tuesday that the company remained focused on the strategy developed under Buechner and Burgmans.
For Nippon Paint, an Axalta deal would help it crack open the US market and boost earnings from automotive coatings, SMBC Nikko Securities analyst Shinobu Takeuchi wrote in a note to clients yesterday.
“However, we would focus on how the firm plans to execute an all-cash buyout, which would demand considerable capital,” the Tokyo-based analyst said.
In March, Nippon Paint acquired US paint company Dunn-Edwards Corp for $608 million.