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PPG’s Second Offer to AkzoNobel Declined

Thursday, March 23, 2017

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Dutch coatings firm AkzoNobel (Amsterdam) has declined a second "unsolicited proposal" from PPG Industries (Pittsburgh), the world's largest coatings manufacturer.

PPG's first offer came March 8, and after Bloomberg reported late Monday (March 20) that PPG was readying another offer to buy AkzoNobel outright, AkzoNobel issued a press release early Wednesday (March 22) announcing it had rejected the new proposal.

AkzoNobel Center
All images courtesy of AkzoNobel unless noted

Amsterdam-based AkzoNobel has now rejected two merger proposals from Pittsburgh-based PPG, the world's largest coatings manufacturer.

Echoing language the company used to describe the first offer, AkzoNobel said the new proposal “fails to reflect the current and future value of AkzoNobel” and “also neglects to address the significant uncertainties and risks for shareholders and other stakeholders.”

AkzoNobel said the offer was valued at 88.72 euros ($96) per share, up from the original offer, which equaled about 83 euros per share. The offer was worth about $26.3 billion overall, according to PPG.

The most recent rejection came one day after The Sherwin-Williams Company announced it was pushing back the close date for its acquisition of The Valspar Corporation to June.

Divestitures, ‘Culture Gap’

The Dutch firm said that the new offer did not address issues that the board brought up in its rejection of PPG’s first offer, including that the acquisition as proposed would require “a large number of substantial divestitures due to the major geographical and segment overlap of both companies across Decorative Paints and Performance Coatings, bringing into question value leakage.”

AkzoNobel lab

Research and development is one area of concern for AkzoNobel, according to the company's press release announcing its rejection of PPG's offer.

It also said the offer would lead to significant job cuts, does not address concerns about research and dvelopment, and “does not meaningfully address our concerns regarding community contribution and sustainability and the significant culture gap between both companies.”

The company said its board rejected the proposal unanimously.

“We are convinced that AkzoNobel is best placed to unlock the value within our company ourselves,” said AkzoNobel CEO Ton Büchner. “We are executing our plan, including the creation of two focused businesses and new cost structure, and believe this gives us a strong platform for continued profitability and long term value creation for all our stakeholders with substantially less execution risks.”

PPG Response

For its part, PPG countered that the revised proposal “strengthens a very attractive and highly compelling opportunity for both AkzoNobel and PPG, their respective shareholders and other stakeholders, and comprehensively addresses all relevant non-financial matters.”

“We believe the revised proposal presents an opportunity for AkzoNobel’s shareholders to realize extraordinary value, by any measure, for their shares in AkzoNobel,” said PPG chairman and CEO Michael McGarry. “It provides them with a premium valuation and the opportunity to receive substantial and immediate cash consideration and participate in the success of the enterprise through ownership of shares in the combined company.”

McGarry said he hopes to have a chance to discuss AkzoNobel’s other concerns. “We are hopeful that AkzoNobel engages with us promptly in order to further discuss and explore the benefits of a combination for its stakeholders,” he said, “including substantial commitments regarding employees in The Netherlands, research and development and sustainability.”

Ctoocheck, public domain, via Wikimedia Commons

PPG reported $14.75 billion in revenue last year, with its Performance Coatings segment accounting for 58 percent of sales.

PPG calls the two companies a “strong cultural fit” with a “history of strong performance” and “commitment to employees, research and development, and community.”

Billions in Revenue

AkzoNobel, the second-largest coatings company after PPG, reported 14.2 billion euros in revenue in 2016.

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.

Some Shareholders Want Talks

While AkzoNobel’s board vote to reject the offer was said to be unanimous, Reuters reported Wednesday (March 22) that shareholders were beginning to pressure the company to engage in talks with PPG.

"The second offer addressed many of Akzo's concerns about research and development, jobs and the firms' cultures, so they should at least discuss it," Paul Koster, of the Dutch Shareholders’ Association, told the news service.


Tagged categories: Acquisitions; AkzoNobel; Business matters; EMEA (Europe, Middle East and Africa); Good Technical Practice; Mergers; North America; PPG

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