Akzo Nobel in new bid to thwart US takeover bid
AMSTERDAM: Akzo Nobel NV, the Dutch paint maker trying to fend off a €24.6 billion ($26 billion) takeover by US rival PPG Industries Inc, yesterday fleshed out its alternative plan to separate its chemicals business and pay shareholders €1.6 billion ($1.72 billion) in extra dividends this year.
Setting out its strategy to investors in London, Akzo said it would sell or list the business, which accounts for about a third of sales and profits, within 12 months.
Analysts have valued the division at roughly worth €8 billion, based on its 2016 operating profit of €629 million.
“This strategy will create substantial value for shareholders with significantly less risks and uncertainties compared to alternatives,” said Akzo chief executive Ton Buechner.
Buechner said that the company might use proceeds of the spin-off to fund acquisitions, but the “vast majority” would be returned directly to shareholders.
Akzo has twice rejected takeover proposals from Pittsburgh-based PPG, despite strong encouragement from many of its shareholders to engage in merger talks.
Investors and analysts have largely been sceptical of whether Akzo’s alternative plan can rival PPG’s proposed offer of €90 per share in terms of value.
Akzo shares gained 1.3% to €79.32 in Amsterdam trading as of 1.54 p.m. local time. This values the company at €20 billion.
While PPG has said it sees merger synergies of at least $750 million, Akzo said yesterday that it would cut costs by €200 million in 2017, of which €50 million would result from the separation of chemicals.
The company, which employs around 46,000 people, declined comment on possible job losses resulting from its plans.
Buechner set a new target for Akzo’s operating margin to improve to 15% by 2020 from 12% at present.
He said the company’s paints and coatings divisions would each grow at 4% annually on the strength of its global brands such as Dulux, one percentage point better than the market.
At the chemicals division to be disposed, the company said it would increase operating profit, as measured by earnings before interest and taxes (EBIT), and before incidental costs, by €250 million by 2020 and another €200 million by 2022.
Earlier yesterday, Akzo reported better than expected first quarter earnings and forecast a €100 million increase in operating profit for the full year.
Operating profit was up 13% to €376 million from €334 million in the same period a year earlier. Analysts polled for Reuters had put the figure at €337 million.
Akzo has argued that PPG’s bid does not adequately address concerns of other stakeholders, including employees.
Buechner said the company has not yet decided whether it will agree to a request by a significant number of shareholders to hold an extraordinary general meeting to debate and vote on the dismissal of chairman Antony Burgmans.
Under Dutch law, shareholders representing 10% of a public company’s shareholder base have the right to summon such a meeting, though they may need to petition a judge if the company refuses.