Akzo Nobel unveils new strategy to split up

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Akzo Nobel has outlined a new strategy to accelerate growth with two high-performing businesses – Paints and Coatings and Specialty Chemicals – which shall lead to a step change in value creation for shareholders and all stakeholders. The proposed takeover by PPG is not part of the new strategy.

Akzo Nobel wants to split up the company within 12 months. -

The company has also reported a record financial performance with its first quarter 2017 results, which are discussed in a separate article.

Strategy: create two focused businesses

The company belives that the logical next phase of creating two separate companies can be build on the strong financial and operational foundation developed in recent years. It should generate superior, faster and more certain value creation than the alternatives and with substantially fewer risks, uncertainties and social costs.The strategy is seen as an alternative to the proposed takeover of Akzo Nobel by US based competitor PPG.

Separation of Specialty Chemicals to take place within 12 months; project teams in place
Dual-track process with active consideration of a separate listed entity or sale
Focused Paints and Coatings business, with fit-for-purpose structure and processes

Accelerating sustainable growth and profitability

EUR150 million annual savings resulting from ongoing continuous improvement programs in Paints and Coatings
Additional EUR50 million expected cost savings related to the separation of Specialty Chemicals
Continued commitment to sustainability with ambition to use 100% renewable energy and be carbon neutral by 2050
Investment of EUR1 billion in research and development by 2020 to maintain focus on innovation and new product development

Enhanced financial guidance

2017 EBIT to be around EUR100 million ahead of 2016 due to significant growth momentum across all Business Areas
Increased 2020 guidance: Paints and Coatings 15% ROS, ROI >25%; Specialty Chemicals 16% ROS, ROI >20%, reflecting continued growth in profitability equivalent to Akzo Nobel's current portfolio of 14% ROS and >20% ROI

Increased shareholder returns

50% increase to the regular dividend per share to EUR2.50 per share, reinforcing confidence in the future plan to further drive growth and profitability
Vast majority of net proceeds from the separation of Specialty Chemicals to be returned to shareholders
EUR1 billion special dividend to be paid in November reflecting confidence in the planned separation

Ton Büchner convident

Büchner

Ton Büchner, CEO of Akzo Nobel said: “The industry-leading performance and outlook of our Specialty Chemicals business gives us the confidence to return proceeds to shareholders in advance of the separation. In addition, we see extensive growth momentum in our Paints and Coatings business, which we expect to keep growing faster than market rates, allowing us to improve our long-term financial guidance.” Regarding the planned separation of Akzo Nobel, he added: “Now is the right time to create two focused, high-performing businesses. This strategy will create substantial value for shareholders with significant less risks and uncertainties compared to alternatives.”

PPG stickst to takeover plans

I a first statement, PPG announced that it still believes in the merits of combining PPG and Akzo Nobel. PPG stated that: “AkzoNobel’s new strategic plan will be more risky and create more uncertainty for AkzoNobel stakeholders including employees and pensioners, as Akzo's revised strategy would create two smaller, unproven companies and result in additional restructuring.”