AkzoNobel rejects 3rd PPG takeover offer, valued at $29B
Latest rebuff could lead to hostile takeover bid
AkzoNobel rejected PPG’s latest acquisition offer on Monday, setting the stage for the Pittsburgh coatings giant to possibly launch a hostile takeover bid for its Dutch paints rival.
If it doesn’t attempt a takeover by June 1, PPG under Dutch law can wait six months to make another overture for Akzo or drop its plan to acquire the company and create the world’s largest coatings business.
After issuing a statement saying it was disappointed that Akzo declined to negotiate a deal over the weekend when PPG officials were in the Netherlands, the Downtownbased company remained mum on its next steps.
Although it has support for its $29 billion deal from some of Akzo’s largest shareholders, PPG faces a complex Dutch corporate defense mechanism if it pursues a hostile bid for Amsterdam-based Akzo, which makes Dulux, Sikkens and other paint brands.
That tool is the stichting, a legal entity many Dutch firms have in place to control priority shares and vote on behalf of management in the event of unwanted takeovers.
In rejecting PPG’s third unsolicited bid, Akzo said the offer undervalued the company and that it wants to focus on its own strategy of increasing value for shareholders by spinning out its chemicals business and paying out extra dividends.
PPG’s latest bid, submitted April 24, was for 90 euros a share, about 50 percent more than Akzo’s stock price before PPG’s first offer became public in March.
Akzo’s shares Monday fell 3 percent to close at 76.85 euros, down 2.55 euros.
PPG closed at $108.43, down $1.73, or 1.57 percent.
Akzo’s decision to try to remain independent comes despite intense pressure from some of its major shareholders who believe a deal with PPG would bring more value than Akzo can achieve on its own.
Leading the charge is Elliott Advisors, an activist hedge fund that owns a 3 percent stake in Akzo and which has called for a special meeting to oust Antony Burgmans, chair of Akzo’s supervisory board. Elliott did not comment Monday.
On Friday, however, Elliott said Akzo’s standalone plan would result in 6,400 employee layoffs while a merger with PPG would result in far fewer job losses.
Akzo has 46,000 employees worldwide; PPG has 47,000.
Both companies generated revenues of about $15 billion last year, but more than 90 percent of PPG’s sales came from paints including consumer brands Glidden, Olympic and Pittsburgh Paints, while Akzo’s chemicals business accounted for about one-third of total sales.
Akzo’s plan is to float that unit through a stock offering or sale within the next 12 months with net proceeds going to shareholders.
It said it would also increase its dividend by 50 percent and pay out a special cash dividend totaling 1 billion euros ($1.09 billion) in November.
Its own strategy “offers a superior route to growth and long-term
value creation” than a merger with PPG, Akzo said.
On Monday, PPG said Akzo’s refusal to negotiate was “ignoring the best interests of its stakeholders, including long-term shareholders who overwhelmingly support engagement.”
After it asked Akzo on Thursday to discuss its latest offer, Akzo notified PPG on Friday that it would meet the following day in Rotterdam.
But when Michael McGarry, PPG chairman and chief executive, and Hugh Grant, PPG’s lead independent director, showed up for the Saturday meeting, Mr. Burgmans and Ton Buchner, Akzo’s chief executive and chair of its management board, said they were not authorized to negotiate, according to PPG.
In a session that lasted less than 90 minutes, PPG said the Akzo officials declined to answer questions or discuss their own plan for Akzo’s future.
“The failure of the AkzoNobel Boards to engage with PPG to fully evaluate and discuss PPG’s proposal reflects a continued lack of proper governance, and is another attempt to avoid a true comparison on stakeholder impacts of PPG’s proposal versus AkzoNobel’s standalone plan,” PPG said in its statement.
While Mr. Buchner described the meeting with PPG officials as “cordial and respectful,” the company reiterated assertions that PPG’s offer doesn’t adequately address a host of issues, including antitrust concerns, jobs, pensions and potential closings of facilities.
It also said PPG doesn’t have a track record with acquisition deals as large as its bid for Akzo.
In recent years, PPG has been on an acquisition spree as it grew its coatings portfolio and shed old-line glass and chemicals businesses.
But its biggest purchases were another Dutch paints maker, SigmaKalon, which it bought for $3.2 billion in 2008, and Mexican coatings business Consorcio Comex, for which it paid $2.3 billion in 2014.
It also acquired Akzo’s North American architectural paints unit in 2013 for about $1 billion.
“PPG is unproven in terms of an integration challenge as complex as the one proposed,” Akzo said.
The company said that by buying Akzo’s specialty chemicals business, PPG would be in conflict with its own strategy to exit the chemicals market.
Among Akzo’s other concerns is having insufficient representation on the board “to safeguard AkzoNobel stakeholder interests” in a combined entity.
Overall, Akzo said PPG’s offer “creates significant risks and uncertainties for thousands of jobs worldwide” and does not attempt to “bridge the significant cultural differences between both companies.”