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Akzo Nobel set to reject €26.9bn PPG bid

Akzo Nobel, the Dutch paints and coatings group, is set to reject a €26.9bn takeover offer by its US rival PPG Industries, in a move that will force its suitor to have to choose between making a hostile bid or walking away.

Akzo is expected to reveal its rejection as soon as early this week, according to people close to the process. It would come roughly two weeks after PPG submitted a third offer to combine with the Amsterdam-based maker of paints, such as Dulux, to create an industry leader in the $130bn paints and coatings sector. 

The expected rebuff is likely to further enrage some of Akzo’s largest shareholders, including hedge fund Elliott Advisors, which has called for a vote to overthrow the chairman of the Dutch company over its refusal to engage in talks with PPG. 

Many of Akzo’s top 20 shareholders have called on the company, either publicly or in private, to enter talks.

PPG characterised its latest cash-and-stock bid as its last friendly offer for the company and has not ruled out taking it directly to shareholders. 

The latest bid valued shares in Akzo at €96.75. It included plans to pay Akzo’s normal dividend as well as a special dividend that the Dutch company announced last month as part of its plans to stay independent and spin off its specialty chemicals business. 

The PPG offer was comprised of €61.50 in cash, with the remainder in PPG shares, valuing Akzo’s equity at €24.6bn at the time it was made. PPG’s previous cash-and-stock offers of €83 and €90 were rejected.

Akzo has consistently resisted PPG’s multi-month pursuit, claiming that the takeover proposals fell short in terms of its expectations for Akzo shareholders as well as the probability that a deal would face lengthy antitrust review. Akzo has found support from its workers and from the Dutch government. 

In its latest offer, PPG included a 14-page letter in which it attempted to appeal to Akzo shareholders, making certain commitments on jobs and also offering to agree to pay a substantial break fee once it is able to conduct due diligence. 

Los Angeles-based Causeway Capital Management, which owns a roughly 6.7 per cent stake in Akzo, added itself to the list of large shareholders calling on the Dutch company to engage with PPG. It also expressed disappointment in Akzo’s decision to reject Elliott’s request for a special shareholders’ meeting to vote on the chairman. 

“PPG’s most recent proposal is both thorough and addresses all stakeholders. We believe that our clients in aggregate represent one of the largest shareholdings in Akzo, and we find it incomprehensible that Akzo’s management has yet to engage with PPG.”

PPG faces a deadline of June 1 to table a firm bid under the rules guiding Dutch takeovers.

Akzo’s share price closed at €79.40, a deep discount to PPG’s latest offer. Akzo declined to comment.

Via FT