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Third PPG Proposal Rejected by AkzoNobel

Tuesday, May 9, 2017

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AkzoNobel (Amsterdam) announced Monday morning (May 8) that it has rejected a third merger proposal from PPG Industries following two weeks of deliberation and a meeting with the Pittsburgh, Pennsylvania-based coatings giant.

PPG Place

PPG made its third offer, worth about $28.8 billion, on April 24; AkzoNobel announced Monday that it had rejected the proposal.

PPG, however, says the Dutch company refused to negotiate, and that the meeting in question was called hastily and did not involve any discussion about AkzoNobel’s concerns regarding the merger plan, or about AkzoNobel’s alternative strategy for growth.

Denied Three Times

AkzoNobel said in its announcement that it had engaged in an “extensive review and careful consideration” of PPG’s third bid, which was made public April 25, and that CEO Ton Büchner and Supervisory Board Chair Antony Burgmans met with PPG Chairman and CEO Michael McGarry and Lead Independent Director Hugh Grant.

Ton Buchner, Antony Burgmans

AkzoNobel says that CEO Ton Büchner (pictured, left) and Supervisory Board Chair Antony Burgmans (right) met with PPG Chairman and CEO Michael McGarry and Lead Independent Director Hugh Grant.

But in the end, the company says, it determined that its stakeholders would be better suited by its plan to accelerate growth by spinning off its Specialty Chemicals business as a separate entity from its Paints and Coatings business.

“The extensive review and the meeting with PPG confirmed to AkzoNobel that its own strategy is better and does not contain the risks and uncertainties inherent in PPG’s proposal,” AkzoNobel said in a press release.

PPG: AkzoNobel ‘Lacks Proper Governance’

PPG responded with a statement saying the company is “disappointed that AkzoNobel has once again refused to enter into a negotiation regarding a combination of the two companies, ignoring the best interests of its stakeholders, including long-term shareholders who overwhelmingly support engagement."

While AkzoNobel pointed to its meeting with PPG executives as part of its “considerable in-depth analysis” of the proposal, PPG offered a different view of the conference. In its statement, PPG said it had gotten no feedback on the April 24 proposal until it contacted AkzoNobel May 4. According to PPG, AkzoNobel replied May 5 and told PPG it would meet only in Rotterdam, in less than 24 hours.

Michael McGarry

PPG says the invitation for McGarry (pictured) to meet with the AkzoNobel chairs came with less than 24 hours' notice, and the meeting lasted only 90 minutes.

PPG says the meeting lasted 90 minutes and that the AkzoNobel executives “stated up front that they did not have the intent nor the authority to negotiate.” The AkzoNobel chairs did not share their concerns about the PPG proposal, and wouldn’t entertain questions about their own planned split, PPG says.

“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.

AkzoNobel: Concerns Unaddressed

In rejecting the latest proposal, AkzoNobel cited many of the same issues it noted previously with regard to PPG’s merger bid. The offer, AkzoNobel said, undervalues the company, includes regulatory risks, would take up to 18 months to complete, contains uncertainty because of its scale, and does not fully address AkzoNobel’s concerns about its employees and its commitment to sustainability.

PPG is currently the largest coatings company in the world, with AkzoNobel second, by sales. A merger with AkzoNobel would be the largest acquisition PPG has ever taken on, the Dutch company noted.

Merger Future Uncertain

The discussion of PPG’s multiple offers has played out publicly, and at times contentiously, over the past two months.

PPG had called its third offer “one last invitation” to AkzoNobel to consider the merger proposal. The new proposal came in at 96.75 euros per outstanding ordinary share of AkzoNobel, bringing the total offer to about $28.8 billion. PPG’s first and second offers, of $22.8 billion and $26.3 billion, were both rejected out of hand by AkzoNobel.

In April, AkzoNobel shareholders, led by hedge fund Elliott Advisers, attempted to engineer the dismissal of board chair Burgmans. AkzoNobel responded by reiterating its confidence in Burgmans, and questioning the relationship of Elliott and PPG.

The future of the merger proposal is uncertain now that AkzoNobel has rejected what was presented as a final offer from PPG. In its statement on Monday, PPG said it “will review the full details of AkzoNobel’s response issued today.”


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

Comment from Jesse Melton, (5/9/2017, 9:17 AM)

Something is amiss at PPG. They've already moved to the intimidating of target stakeholders stage. That's desperation. Too bad that only works on US companies, somebody should have told them.

They want to bury something in the M&A process and I think AkzoNobel knows it too. Whatever it is it's bad. Expect special filings and DOJ inquiries soon.

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