DULUX DOGFIGHT
The battle for AkzoNobel
THIERRY Vanlancker will never be as famous as Lewis the Old English Sheepdog – the ‘Dulux dog’ his company uses in advertising.
But he makes fending off pitbulllike US activist investors amid multi-billion pound takeover bids sound like taking that dog for a walk in the park.
AkzoNobel is the Dutch chemicals firm that took over two of Britain’s most famous industrial names – Courtaulds in 1998 and ICI in 2007. It now employs 3,500 staff in the UK and has 80,000 pensioners, mainly from ICI. It owns brands found in every British home: Dulux, Cuprinol, Hammerite and Polycell.
It has also been at the centre of a vicious dispute with its biggest shareholder, a $28.5 billion (£21 billion) US hedge fund called Elliott Advisors, which has a 9.5 per cent stake. Elliott wants AkzoNobel to break up or sell out to a rival. After beating away the US predator fund in the summer, the firm is bracing itself for a fresh assault.
Founded by US billionaire Paul Singer, Elliott made its formidable reputation by buying loans owed by companies and countries in trouble and doing whatever it took to make them pay up.
In a 15-year fight with Argentina, Singer walked away with $2.4 billion for Argentine bonds he bought for $117 million. It followed a worldwide legal battle that saw him make a failed attempt to seize an Argentine navy training ship – the ARA Libertad, crewed by 200 sailors – in a port in Ghana in 2012 in a bid to force Argentina to pay up.
Singer, whose son Andrew is gay, has won a reputation for tolerance on social issues, but remains red in tooth and claw in business.
Vanlancker, a 52-year-old Belgian, was in Ashington, Northumberland, last week to open the world’s most advanced paint plant. The £100 million factory can make 80 million cans of Dulux paint a year – enough to decorate every living room, bathroom and kitchen in Britain.
Lewis, the latest of the Old English sheepdogs that have advertised the brand since 1961 and pictured above, was there, too, though he can only aspire to the fame reached by a predecessor, Digby. The latter’s Dulux commercials were so successful that he went on to play the lead in the film Digby, The Biggest Dog In The World. Vanlancker said: ‘This fac- tory is a paint engineer’s dream, but it also shows how we intend to keep the Dulux dog alive and kicking in the UK – where almost one in two surfaces has our product on it. The UK is an £800 million market for us and we support about 1,000 jobs in the North-East alone.’
Vanlancker has just taken over from Tom Buchner, who quit for health reasons, immediately after a truce was called with Elliott. Chief financial officer Maelys Castella has just stepped down for health reasons, too, unconnected with the Elliott saga and the plan is for her to return. Vanlancker says he is not concerned about becoming a casualty. ‘I do not feel easily intimidated. I am not worried about taking on this job. I’m confident I’m going to have fun in this role.
‘All the Elliott stuff – that is part of the job. I’ve only been here six weeks but it’ll be nice to have a conversation with Elliott that’s not in the press or court room,’ he said.
Elliott wanted the firm to split its chemicals arm from its paint and industrial coatings division. Akzo Nobel now plans to do that, though it insists this is its own decision and that it has not caved in to pressure.
Elliott also wanted AkzoNobel to engage with US group PPG Industries, which made three takeover offers culminating in a £22.5 billion bid approach in May. AkzoNobel refused. Elliott went to court twice to get rid of AkzoNobel chairman Antony Burgmans, who was seen as the key stumbling block. The courts backed AkzoNobel.
Both sides have agreed a threemonth truce, but under stock market rules, PPG is free to return with another bid in December. Burgmans’ term ends in May.
Vanlancker says this time around AkzoNobel will be in a better position to explain its plans for the future. It has promised investors a better return than PPG could offer. Pity, then, that a few days ago it had to announce a profits warning.
Vanlancker admitted the firm is no longer on track to increase opera t i ng pr of i t s by € 1 0 0 mil li o n (£90 million) in 2017. He blames currency fluctuations.
Nor is he fazed by Brexit. ‘The paint made here is for the UK market, so the fluctuations in the pound have very little impact. But, like everyone else, we would like clarity on Brexit,’ he said.
AkzoNobel has paid top-ups of £300 million a year into its British pension schemes, invests heavily in research and creates jobs. Its supporters fear all this is at risk if it is taken over. Elliott, however, claims that without activist investors to light a fire under boards, then companies will be run for the benefit of directors, not shareholders.
‘I am not the kind of person who worries too much about what will happen to me,’ Vanlancker says. ‘We wanted to bring clarity to what we are doing and we are confident shareholders including Elliott will like our plans.’
He has been talking to shareholders on a charm offensive, though not yet to Elliott. It is a tough task. Perhaps he should take the dog.