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AkzoNobel Rejects PPG's Second Bid

23.03.2017 -

US paints and coatings giant PPG Industries is doubling down on its efforts to bring AkzoNobel to the negotiating table. After the Dutch rival rejected its first bid, the Pittsburgh-based company made a second offer, of €90 per share on Mar. 20 – a 40% premium on AkzoNobel’s last trading price on Mar. 8. The first bid of €83 represented a 29% premium. However, AkzoNobel has also rejected this second unsolicited, non-binding and conditional proposal from PPG saying that the proposal would not only fail to reflect the current and future value of AkzoNobel, but it would also neglect to address the significant uncertainties and risks for shareholders and other stakeholders.

Up to now, AkzoNobel has remained firm that it will not engage in dialog with PPG, although all stock market watchers are not convinced. CEO Ton Büchner said the company “considered and rejected” the first proposal as it “was not good enough even to merit engaging with the bidder.”  In its Mar. 22 statement, it said the proposal “not only fails to reflect the current and future value of AkzoNobel, it also neglects to address the significant uncertainties and risks for shareholders and other stakeholders.”

The latest offer is comprised of €57.50 in cash and 0.331 shares of PPG’s common stock, valuing the company at €24.5 billion ($26.3 billion). The US coatings company’s CEO Michael McGarry, said PPG believes the revised proposal presents AkzoNobel’s shareholders with an “opportunity to realize extraordinary value by any measure, adding that he believes regulatory clearance could be obtained.

In a conference call with journalists, Büchner said PPG's first proposal came at a time of “high sensitivity” and “created a tremendous uproar” just before the Mar. 15 election, in which it was feared that nationalist sentiment might prevail. "That's just one example of cultural differences" between the two companies, the CEO said.

From Akzo’s viewpoint, any merger with PPG would result in job losses and substantial divestitures. In the aftermath of the first bid, Dutch politicians including Economics Minister Henk Kamp said a takeover by the US company “was not in the Dutch national interest,” and four provincial governors said it would likely cost jobs.

AkzoNobel's anti-takeover defenses are said to include a foundation with the power to appoint corporate officers. Büchner said initially that the foundation – whose members include members of the supervisory board – was not consulted on the bid, even if it was aware of it. As another defense against a potential takeover, the Dutch company said earlier it had brought forward its plans to spin off its chemicals business, worth €4.8 billion in 2016 sales.

The potential combination of the Dutch and US players, which would create a global coatings and chemicals and group with revenues of $42 billion, if regulatory authorities did not mandate divestments.

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