Akzo Nobel has rejected a second takeover bid in less than three weeks from US rival PPG, claiming that the revised offer of €22.4bn failed to recognise the value of the Dutch paints and chemicals group.
The latest takeover attempt by the US company represented a €1.5bn improvement on the previous offer, but was not enough for Akzo Nobel’s board, who rejected it unanimously.
The maker of Dulux paint said the bid did not address “the significant uncertainties and risks for shareholders and other stakeholders”, including antitrust concerns and potential job cuts.
The second cash and stock offer was worth a total of €88.72 per share. Of this €56.22 came in cash and 0.331 PPG in shares. Shares in Akzo Nobel fell 3.3 per cent to €74.11 following the group’s statement on Wednesday morning.
The attempted buyout of the 225-year old company has attracted criticism from politicians in the Netherlands, worried about job cuts and the country’s corporate champions being picked off by larger rivals. Earlier this week, four Dutch provinces released a statement opposing the deal, saying that it put 5,000 jobs at risk.
The response was especially fierce as it came during an election campaign and just weeks after Kraft-Heinz launched an audacious bid for Unilever, the Anglo-Dutch consumer group. When dismissing the bid on Wednesday, Akzo Nobel’s management complained there was a “significant culture gap” between the two companies.
Despite the political opposition, PPG had hinted it would return for a second attempt after its first bid — worth €83 per share — was rejected.
A tie-up would create the dominant group in the $130bn global paints and coatings market and attract stiff scrutiny from antitrust regulators — something that Akzo Nobel mentioned on Wednesday.
“These antitrust issues would have a significant negative impact on employees and customers which will affect the integrity of Akzo Nobel,” it said.
PPG’s first approach came after Akzo Nobel faced pressure from shareholders to boost its lagging share price, which had languished at around €60 since 2014.
In the wake of the first bid, two of its top 20 shareholders told the FT they wanted the company’s management to “engage” with PPG.
One said that while they were not unhappy with the substance of the decision, they were displeased with the forceful manner and tone. Akzo Nobel chief executive Ton Büchner spent last week discussing the situation in more detail with shareholders to shore up support.
During a conference call with journalists on Wednesday, Mr Büchner refused to be drawn on whether the company would deploy any defensive measures to deter a hostile takeover. “We have reviewed the proposal extraordinarily carefully,” he said. “We are convinced we are best able to unlock the value in Akzo Nobel.”
The Dutch group’s corporate governance has a decades-old provision that creates a foundation with priority shares that acts as a poison pill to protect the incumbent board and prevent a hostile takeover.
Mark Kelly of Olivetree, a broker and consultant, pointed to Akzo Nobel’s comments that the PPG offer contained too much stock and leverage.
“They are saying we want neither more stock nor more cash, so it’s hard to see the angle to get an offer accepted with that backdrop.”
He added: “PPG chose to address the target board rather than shareholders — they really haven’t done much with the latter group since the first approach, so there might yet be another iteration here — but it remains incredibly hard to see any transaction being successful.”
“PPG’s bid falls well short of the €95 a share that Akzo’s share investors are looking for,” wrote Jeremy Redenius, analyst at Bernstein.
“We think PPG knew they needed a second bid in the €90s to get engagement from Akzo . . . and elected to not be aggressive enough, which calls into question their desire to return with a yet higher offer.”
The latest bid will nevertheless pile more pressure on Mr Büchner to reveal more of his own plans for the company, which will focus on paints and industrial coatings after the separation of its speciality chemicals business.
The announcement of that proposed spinout was planned for later in the year, rather than a reaction to PPG’s bid, Akzo Nobel has said.
During five years at the helm of the historic group, which traces roots to Swedish inventor Alfred Nobel, Mr Büchner has concentrated on making Akzo Nobel a leaner and more efficient operation.
Although he is credited for improving its financial performance, some have questioned his decisiveness over what happens next following a wide-ranging restructuring.
Analysts say Akzo Nobel’s stock trades at a multiple discount to its peers, a situation that can make it more susceptible to take over attempts.
When asked at what point Akzo would consider a bid, Mr Büchner said “it is not for us to speculate on the future”.
