Dutch AkzoNobel rejects third bid from US PPG as takeover battle continues

(adds additional AkzoNobel comments, PPG statement and Bernstein commentary from paragraph 4)

LONDON (ICIS)–AkzoNobel said on Monday it has rejected the third takeover bid by US paints and coatings firm PPG Industries, as the sweetened offer still undervalues the Dutch specialty chemicals producer.

The latest PPG bid issued on 24 April values the Dutch specialty chemicals and paints producer at about €24.6bn and represents a premium of 50% over its unaffected closing price of €64.42 on 8 March 2017.

“AkzoNobel has concluded its own strategy, presented on April 19, 2017, offers a superior route to growth and long-term value creation and is in the best interests of shareholders and all other stakeholders,” the Dutch producer said in a statement.

The Dutch company said that it tested PPG’s bid on four key areas: value, certainty, timing, and stakeholder considerations.

In terms of value, AkzoNobel concluded that PPG’s bid undervalues the company and “does not reflect AkzoNobel’s current and future value”. It also believes the bid risks potential leakage of value through loss of customers, key employees and partners.

In terms of timing, AkzoNobel says that “other than generic statements”, PPG’s proposal contains no commitments to increase shareholder returns for 2017. It also says the proposal “faces complex and lengthy regulatory hurdles that could take up to 18 months to complete”.

AkzoNobel says that PPG’s bid lacks certainty as PPG “has not undertaken an acquisition of this size and is unproven in terms of an integration challenge as complex as the one proposed”. It also stated that the acquisition is in direct conflict with PPG’s stated strategy of exiting the specialty chemicals industry.

As stated in previous rejections, AkzoNobel reaffirmed its stance that PPG’s proposal fails to sufficiently address significant stakeholder concerns, uncertainties and risks. It also fails to “recognise or substantiate any commitments to bridge the significant cultural gap differences between both companies”.

AkzoNobel also confirmed that its CEO Ton Buchner and supervisory board chairman Antony Burgmans met with PPG CEO Michael McGarry and lead independent director Hugh Grant on 6 May.

In a media conference on Monday, Buchner refused to comment on the details of the meeting, saying only that AkzoNobel approached it “with an open mind” but heard “no modifications, no commitments, nothing new” from PPG.

Buchner also said that AkzoNobel will not comment on how it expects PPG to proceed from this point on, saying: “The approach that they will take going forward is pure speculation and we’re not going to get involved in that.”

In a response from PPG on Monday, it said that it is “disappointed that AkzoNobel has once again refused to enter into a negotiation regarding a combination of the two companies, ignoring the best interests of its stakeholders, including long-term shareholders who overwhelmingly support engagement”.

Commenting on the meeting between the two companies in Rotterdam on 6 May, PPG said: “The meeting lasted less than 90 minutes and the AkzoNobel chairs stated at the beginning that the meeting was solely for the purpose of reviewing PPG’s revised proposal.

“Specifically, the AkzoNobel chairs stated up front that they did not have the intent nor the authority to negotiate. They also did not share any concerns regarding PPG’s proposal, or analysis or comparison of their new standalone strategy versus PPG’s proposal, nor would they entertain any questions or discussion about their plan or analysis.”

PPG stated that it still believes its proposal is “vastly superior” in terms of value creation and that it will review the full details of AkzoNobel’s rejection in time.

Analysts at Bernstein Research, who have so far fully supported the idea that AkzoNobel should engage with PPG, said that it expects the pressure on management at AkzoNobel to continue.

“We are sceptical of Akzo’s new targets, but management is under great pressure to deliver, which is good for shareholders.”

Focus article by Niall Swan

Additonal reporting by Pearl Bantillo