AkzoNobel Rejects PPG Bid, Eyes Spin-off

10.03.2017 -

All in one day, Dutch coatings specialist AkzoNobel revealed on Mar. 9 that it had received an unsolicited takeover offer from US rival PPG and was looking at spinning off its specialty chemicals business.

The Amsterdam-headquartered company said it had rejected PPG’s €20.9 cash and stock bid, which values its shares at €83 each – a 29% premium over its last price before the announcement – as it substantially undervalues its prospects and is not in the interest of its customers and employees.

AkzoNobel noted that in response to the bid it had brought forward its plans to spin off its chemicals business, worth €4.8bn in annual sales last year. CEO Ton Büchner stressed that management believes the company is best placed to unlock value on its own. Commenting on spin-off plans for Specialty Chemicals, he said the business has leading positions across a range of market segments. Altogether the company has more than €14 billion in annual sales.

The PPG proposal would be “detrimental to the societies and economies in which AkzoNobel operates, including potentially jeopardizing the company’s major contribution to communities and research & development organizations globally and its deep commitment to sustainability,” Büchner added.

As part of the separation from Specialty Chemicals, the CEO said the company will consider various alternative ownership structures for both the coatings and chemicals units, with an eye to maximizing shareholder value, along with unspecified “broader stakeholder considerations.”

PPG has shown no signs it is ready to back away from the offer. The Pittsburgh, Pennsylvania company’s CEO, Michael McGarry, said a merger would present “a unique opportunity to build on the successful legacies of our businesses.” He added the company believes there is a “strong strategic rationale” for a deal. The two paints and coatings producers have had dealings with each other in the past. In 2013, PPG bought AkzoNobel’s North American architectural coatings business for $1.05 billion.

The potential combination of the Dutch and US players, which would create a global coatings and chemicals and group with revenues of $42 billion, would be eyed critically by regulatory authorities, observers commented, as the overlap in the portfolios and the already limited competition in the highly concentrated global coatings market would be a hindrance to approval.

In rejecting PPG’s advances, AkzoNobel has strong allies in the Dutch political sector. Economics Minister Henk Kamp, minister stated unequivocally that the PPG bid is “not in the Dutch interest.”