AkzoNobel rejects 3rd PPG Industries takeover bid

Tammy Harvey
May 9, 2017

But opposition from its boards, Dutch politicians and many of its Dutch staff present difficulties PPG will have to weigh before a June 1 deadline to bid or walk away for at least six months. Akzo's shareholders, judging by public statements, like the deal.

Chief executive officer Ton Buchner said: "The PPG proposal undervalues AkzoNobel, contains significant risks and uncertainties, makes no substantive commitments to stakeholders and demonstrates a lack of cultural understanding".

AkzoNobel said it rejected the latest offer after "considerable in-depth analysis" including talks with PPG's CEO, Michael McGarry. PPG has said it has no plans to break up Akzo following an acquisition.

However, the Dulux owner said on Monday that the latest offer undervalues the company and does not include an appropriate change of control premium, which needs to be based on a valuation reflecting AkzoNobel's strategy, including the recently announced plans to separate Specialty Chemicals and accelerate growth in Paints and Coatings. However, PPG has boasted that the offer is 50% higher than the value of Akzo's shares back in March before the first offer was made public. Akzo's shares fell 3 percent to 77 euros per share on Monday. Morgan Stanley said in a note that "we think the shares are likely to fall to mid-70s this morning, as the market adjusts to a lower probability of a successful transaction".

PPG has not yet given a response to the rejection of their third bid.

PPG said that Buchner and AkzoNobel's supervisory board chairman Antony Burgmans opened the meeting by saying "that they did not have the intent nor the authority to negotiate" and refused to discuss AkzoNobel's restructuring plan.

Finally, the deal would create uncertainty for Akzo employees. Azko's decision to reject its offer ignores the best interest of its stakeholders, PPG added.

But there is a major barrier: Like many large Dutch companies, Akzo has a "stichting" or foundation that owns "priority shares" giving it the right to appoint management.

PPG had warned its third offer was "one last invitation" to AkzoNobel to "engage with us on creating extraordinary value and benefits for all of AkzoNobel's stakeholders".

The Dutch economic affairs minister has openly opposed an Akzo Nobel takeover amid rising nationalist sentiment in the Netherlands, and some of its Dutch employees are concerned that US ownership would lead to job losses.

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