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PPG Makes Bid for AkzoNobel

Friday, March 10, 2017

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PPG Industries made an offer to buy its largest competitor in the paint and coatings industry, AkzoNobel, but the Dutch firm rejected the bid, and is now exploring the possibility of spinning off one of its business units.

AkzoNobel said Thursday (March 9) that it is reviewing its options to separate its Specialty Chemicals business after rejecting outright the offer from PPG to purchase its entire business.

The offer, which AkzoNobel says was unsolicited, non-binding and conditional, came in at 54 euros cash (about $57.23) and 0.3 PPG shares per AkzoNobel share, the company says. AkzoNobel says that would make the offer equivalent to 83 euros per share. The deal overall would have been valued at about $22 billion.

Ton Buchner

“The unsolicited proposal we received from PPG substantially undervalues our company," AkzoNobel CEO Ton Büchner said.

PPG (Pittsburgh) is the largest coatings manufacturer in the world; AkzoNobel (Amsterdam) is the second-largest, according to 2016 sales figures. PPG purchased AkzoNobel’s North American decorative paints business in 2013 for more than $1 billion, most notably acquiring the Glidden brand.

Fortune reports that a PPG acquisition of AkzoNobel would be the largest purchase of a Dutch company by an American company in history.

“The unsolicited proposal we received from PPG substantially undervalues our company and contains serious risks and uncertainties,” AkzoNobel CEO Ton Büchner said in a statement. “The proposal is not in the interest of AkzoNobel’s stakeholders, including its shareholders, customers and employees, and we have unanimously rejected it.”

PPG Response

PPG countered that it had made an “attractive and comprehensive" offer, and said it “will carefully evaluate and consider its position and path forward related to its proposal.”

Michael McGarry

“We believe a combination of our two companies is a very compelling strategic opportunity," said PPG chairman and CEO Michael McGarry.

“PPG has long admired AkzoNobel’s businesses, global presence, culture and principles as well as its advances in innovative product development and sustainable business practices,” PPG chairman and CEO Michael McGarry said in a statement. “We believe a combination of our two companies is a very compelling strategic opportunity.”

“PPG has carefully considered the interest of all AkzoNobel stakeholders including shareholders, employees, customers and the communities it serves and has proposed its willingness to enter into serious commitments in respect of all stakeholders,” he added.

Specialty Chemicals Review

AkzoNobel said that in light of the offer, it is launching a review of strategic options for the separation of its Specialty Chemicals business. The Dutch company said it would consider alternative ownership structures, including the possible establishment of an independent listed entity.

PPG Place
Ctoocheck, public domain, via Wikimedia Commons

Pittsburgh-based PPG reported $14.75 billion in revenue last year.

AkzoNobel's Specialty Chemicals portfolio includes polymer chemistry products, ethylene- and sulfur-based products, bleaching and oxidizing chemicals, surface chemistry products and salt-chlorine products, among other materials. Its products are marketed under brands including Akucell, Broxo and Butanox.

The separation of Specialty Chemicals, the company says, would “allow the Specialty Chemicals business to continue to build and accelerate its market-leading positions across a range of market segments.” AkzoNobel’s Specialty Chemicals business had 4.8 billion euros in revenue in 2016, the company says.

“We are reviewing strategic options to separate it from the company to create focus for both Specialty Chemicals and the Decorative Paints and Performance Coatings group, allowing them to build further on their respective leadership positions,” Büchner said.

The Players

AkzoNobel reported 14.2 billion euros in revenue in 2016. Its Specialty Chemicals business reported a 4 percent drop in revenues in 2016 as compared with 2015, due to factors including exchange rates, acquisitions and divestments, and price mix, but reported a 1 percent increase in volumes.

PPG reported $14.75 billion in revenue last year. Its Performance Coatings segment accounted for 58 percent of sales; Industrial Coatings accounted for 39 percent, and glass, which the company has largely been selling off in recent years in order to focus on coatings, accounted for 3 percent.


Tagged categories: Acquisitions; AkzoNobel; Asia Pacific; Business operations; Coatings manufacturers; Construction chemicals; EMEA (Europe, Middle East and Africa); Glidden; Good Technical Practice; Latin America; Mergers; North America; PPG

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