PPG Pulls AkzoNobel Merger Proposal
After three bids in less than three months, PPG Industries (Pittsburgh) announced Thursday (June 1) it would no longer pursue a merger with Dutch rival AkzoNobel (Amsterdam).
PPG, which had been the world’s largest coatings company prior to the close Thursday of The Sherwin-Williams Company’s acquisition of Valspar, said it made one final attempt to engage with AkzoNobel in the form of a letter last week, but was rebuffed. The company decided at that point to give up on the merger bid, which lasted for over two months and involved three formal offers.
AkzoNobel said in a statement, also issued June 1, that it will continue to pursue its stated plan to spin off its Specialty Chemicals unit into a separate business from its Paints and Coatings unit, a move that the company says will help it to accelerate growth.
“We believe this will lead to a step change in growth and long-term value creation for our shareholders and all other stakeholders,” AkzoNobel CEO Ton Büchner said in the statement.
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 accounted for 3 percent. The company announced last week that it would sell its final fiber glass unit, focusing solely on paints, coatings and performance materials. PPG is now the world's second-largest coatings company in the wake of Sherwin-Williams' acquisition of Valspar, which makes Sherwin-Williams the world leader by sales.
PPG's consumer brands include Glidden, PPG Paints, Olympic and, in North America, Dulux.
AkzoNobel said in a statement that it will continue to pursue its stated plan to spin off its Specialty Chemicals unit into a separate business.
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.
AkzoNobel's brands include Dulux (in Europe), Sikkens, Interpon powder coatings, and the International brand of protective and marine coatings.
The First Bid
The merger bid began March 8, when PPG made a private, unsolicited bid of about $22 billion for the acquisition of AkzoNobel, which, given the size of the players involved, would likely have amounted to a merger-of-equals. One day later, AkzoNobel rejected the bid out of hand in a public statement, saying it undervalued the company and contained “serious risks and uncertainties.”
After the first bid, AkzoNobel also said it was preparing a plan to spin off its Specialty Chemicals business, as an alternative way to spur growth in the company.
|Images courtesy of PPG (McGarry,), AkzoNobel (Büchner)|
PPG Chairman and CEO Michael McGarry (left) said a last-minute meeting in Rotterdam was not productive because AkzoNobel CEO Ton Büchner (right) and his executive team would not negotiate.
Two weeks later, on March 22, PPG made its second bid, worth about $26.3 billion. AkzoNobel again publicly denied the offer, raising concerns about divestitures that could be required, the lengthy regulatory approval process and what it called a “significant culture gap” between the companies.
PPG Goes Public
On April 7, PPG, which had previously pursued the merger through private communication with AkzoNobel executives, made a public plea to the company to come to the table for talks. Not long after, activist hedge fund Elliott Advisers called for a meeting of AkzoNobel shareholders on the topic of removing Antony Burgmans, the company's board chair. AkzoNobel responded by calling for PPG to clarify its relationship with Elliott. The Dutch company would later deny the meeting request.
On April 20, AkzoNobel detailed its plan to split off its Specialty Chemicals business, and announced what it called “record profitability” in the first quarter of 2017. The company said it would reap 50 million euros in savings by separating the unit off.
On April 24, PPG publicly released a letter to AkzoNobel, detailing its third and final offer, which the company said it would consider. On May 8, AkzoNobel announced it had rejected the bid. PPG refuted AkzoNobel’s claims that the two companies had met to discuss the offer.
PPG officials said that AkzoNobel called a last-minute meeting in Rotterdam on less than 24 hours’ notice, and that Büchner and Burgmans refused to negotiate. PPG said the refusal to negotiate represented a “continued lack of proper governance” at AkzoNobel.
In May, PPG said that its proposal still stood, and that it was considering its next move. Some shareholders attempted to get AkzoNobel to the bargaining table: Fund manager Tweedy, Browne Company LLC wrote a letter to the company’s supervisory board criticizing its inaction, and Elliott Advisers moved to try to remove Burgmans via a legal challenge.
Last month, some speculated that PPG would attempt a hostile takeover of the Dutch firm, but PPG’s June 1 statement indicates that the saga has come to an end.
“We were hopeful throughout this process that AkzoNobel’s boards would see the merits of our compelling proposal to combine our two great companies and create significant shareholder value and a more sustainable business for the future,” said Michael McGarry, PPG chairman and CEO. “We strongly believe a combined company would create more opportunities and provide more benefits for our collective customers, employees, shareholders and society in general.”
Büchner, however, sees it differently.
“Our talented teams around the world continue to develop, produce and deliver the most innovative and sustainable products and services for our customers, and I would like to thank all colleagues for their ongoing commitment,” the AkzoNobel CEO said. “We reiterate our commitment to maintain an open and constructive dialog with our shareholders and all other stakeholders.”