Akzo Nobel rejects $22
billion PPG bid, looks to spin off chemicals
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[March 09, 2017]
By Toby Sterling
AMSTERDAM
(Reuters) - Dutch paints and coatings maker Akzo Nobel NV rejected a 21
billion euro ($22 billion) bid from larger U.S. rival PPG Industries Inc
on Thursday, saying instead it wanted to "unlock value" by spinning off
its chemicals business.
PPG's unsolicited offer comes just days before an election where the
vulnerability of the biggest Dutch companies to foreign takeover has
been a concern.
Akzo Chief Executive Ton Buechner said the maker of Dulux paint was best
placed to create value itself and was looking at floating or selling its
specialty chemicals arm, which accounts for roughly a third of sales and
earnings, with a 2016 operating profit of 629 million euros on sales of
4.8 billion euros.
The cash and share offer from PPG was "unsolicited, non-binding and
conditional" and worth around 83 euros per share, Akzo said. The bid
represented a 29 percent premium to Akzo's closing price of 64.42 euros
on Wednesday and its shares rose 14 percent to 73.49 euros on Thursday,
nearing all-time highs.
Pittsburgh-based PPG confirmed its approach on Thursday, saying its
proposal was "attractive and comprehensive."
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"We believe a combination is a very compelling strategic opportunity,"
said CEO Michael McGarry in a statement, adding he believed it was in
the interest of shareholders, employees and customers as well.
"PPG...has devoted has devoted significant time and resources to
analyzing a potential combination of PPG and AkzoNobel and is confident
in its ability to execute and complete the proposed transaction," it
said.
But Buechner said Akzo's management and supervisory boards had
concluded that the PPG proposal failed "to reflect the long-term value
creation potential of the company".
PPG's offer was also risky because cost savings were uncertain, it would
lead to a highly leveraged company, and it stood a good chance of being
blocked by regulators, he added.
However, analysts said there could be merit in a deal.
"In our view, Akzo Nobel could in large parts be a good fit for PPG in a
fragmented global coatings market," said Kepler Cheuvreux analyst
Christian Faitz in a note.
Faitz said the pair were the two biggest players, with PPG holding 12
percent of the market and Akzo another 9 percent.
"One significant overlap would be in automotive refinish, while all
other segments except for decorative paints in Europe would be a good
complementary fit," he said.
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![](../images/030917pics/busine77.jpg)
AkzoNobel's logo is seen
in Amsterdam, Netherlands, February 16, 2012. REUTERS/Robin van
Lonkhuijsen/United Photos/File Photo
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DUTCH TAKEOVER FEARS
Analyst Jauke de Jong of AFS Group in Amsterdam said he thought regulators would
oppose the deal on antitrust grounds and he doubted PPG could overcome Akzo
opposition.
"AkzoNobel has sufficient takeover defenses to block a hostile takeover," he
said.
There could also be political opposition after Dutch Finance Minister Jeroen
Dijsselbloem on Tuesday warned that large Dutch companies were being targeted by
foreign buyers because they are cash-rich. He called for a panel modeled on the
Committee on Foreign Investment in the United States (CFIUS) with the power to
block industrial takeovers.
Buechner said Akzo had intended to announce plans to sell or float the specialty
chemicals division later this year, but had brought forward the announcement
after PPG's offer.
If Akzo does spin off the division, it will be the latest in a series of
European companies to attempt to unlock greater shareholder value by doing so.
Akzo's specialty chemicals business makes ingredients used in industrial
processes and products, including polymers, salt and chloralkalines used for
making everything from foodstuffs to household products, paper, vehicles and
constructing buildings.
Akzo, which has net debt of 1.25 billion euros, fell short of analyst earnings
estimates in the last three months of 2016, as its marine and energy sectors
weighed. Restructuring costs also pressured results.
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In January PPG reported adjusted full year operating income of $1.55 billion. It
has net debt of $3.8 billion and a market capitalization of $27 billion.
(Additional reporting by Thomas Escritt Thyagaraju Adinarayan and Danilo Masoni;
Editing by Alexander Smith and Keith Weir
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