Akzo Nobel rejects second takeover proposal from PPG

The revised proposal represents a value of 88.72 EUR (adjusted for final dividend) consisting of 56.22 EUR (adjusted for final dividend) in cash and 0.331 PPG shares, as at 20 March 2017, per Akzo Nobel share. More information about the first offer can be found here. CEO Ton Büchner commented: “This proposal significantly fails to recognize the value of Akzo Nobel. Our Boards do not believe it is in the best interest of Akzo Nobel's stakeholders, including our shareholders, customers and employees. That is why we have rejected it unanimously.” In a press release, the company lists the board’s concerns with the proposal, as it would:

1. Is not in the best interests of shareholders. It substantially undervalues AkzoNobel and fails to reflect the value creating opportunities of the new strategic direction and focus for both the Specialty Chemicals and the Paints and Coatings businesses, allowing them to build further on their respective leadership positions.
2. Contains significant risks related to the increased stock component and the high leverage of the proposed combined businesses.
3. Would result in 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. It does not address the significant risk and uncertainty, including timing, of deal completion due to extensive anti-trust concerns. These anti-trust issues would have a significant negative impact on employees and customers which will affect the integrity of Akzo Nobel.
4. Will lead to significant job cuts. It includes synergies which can be expected to result in the restructuring of the combined employee base, leading to job losses. PPG provides no substantive commitments to employees, creating potential uncertainty for thousands of jobs worldwide.
5. Does not address fundamental stakeholder concerns and uncertainties, nor does it substantiate any tangible solutions in relation to, among others, R&D, pensions and employees.
6. Does not meaningfully address our concerns regarding community contribution and sustainability and the significant culture gap between both companies, including how any issues arising from this would be addressed.

Instead, a separation of Akzo’s Speciality Chemicals business remains in the focus. “We are convinced that Akzo Nobel is best placed to unlock the value within our company ourselves”, explains 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.”

Update: According to an article published by the BBC, a large, but anonymous, investor is demanding some effort by the Akzo management to convince them of not selling to PPG. According to the BBCs article, the investor claims, Akzo has been “cheap” for a long time.

In a recent blog our editor Damir Gagro already published some thoughts about the possible impacts a takeover would have to the global coatings business.