PPG and DLJ Bid for Courtaulds, Akzo Nobel Expected to Fight On

18 May 1998 00:00  [Source: ICB Americas]

PPG Industries is considering making a joint bid with Donaldson, Lufkin & Jenrette (DLJ), the US investment bank, for Courtaulds, raising the likelihood of a takeover battle for the UK-based coatings and fibers group.

On May 11, Courtaulds' board formally recommended a 450 pence ($7.33 per share) offer from Akzo Nobel that would value the company at £1.83 billion.

But in a letter to shareholders, Sir David Lees, Courtaulds' chairman, said the company has "very recently received a preliminary approach from another party."

PPG later issued a statement admitting that both itself and DLJ Merchant Banking partners (DLJMB), the merchant banking arm of the US bank, are talking to Courtaulds. "If these talks lead to an offer for Courtaulds, PPG would retain Courtaulds' coating business, while DLJMB would acquire Courtaulds' remaining businesses," it said.

Coatings and resins, mostly in the automotive sector, account for around 40 percent or $3 billion of PPG's total sales of more than $7 billion. In the year through the end of March, sales by Courtaulds' coatings and sealants division were £983 million, ensuring that a merger between Courtaulds and PPG would create by far the world's largest industrial coatings operation.

DLJ would acquire Courtaulds' fibers and chemicals operation with sales last year of £874 million, mainly in viscose, the new cellolosic fiber lyocell and acrylic fibers and acetate yarn.

"If the Courtaulds directors reject a new offer from the PPG consortium, it would then have to go hostile, triggering a bitter takeover battle," says Martin Evans, chemicals analyst at London stockbrokers Sutherlands. "Other parties could come up with counter-bids because Courtaulds has an attractive coatings business."

Akzo Nobel stressed that it wanted a friendly takeover when it made its offer for Courtaulds last month. But it is thought to be willing to face a confrontation with PPG and DLJ or any other rival bidder, particularly since there are likely to be few similar opportunities for large acquisitions in coatings.

"Akzo Nobel will fight," says Andreas de Groot gan Emdden, chemicals analyst at MeesPierson Bank NV, Amsterdam. "Previously it might have been in their nature to avoid takeover battles. But natures can change."

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