Akzo Nobel
Akzo Nobel lab researcher

PPG Said to Prepare New Akzo Bid After $22.4 Billion Failed

March 21, 2017
PPG CEO Michael McGarry is attempting the company’s largest ever deal just 18 months into the top job.

PPG Industries Inc. (IW 500/74) is preparing a renewed takeover bid for Akzo Nobel NV (IW 1000/240), according to people familiar with the matter, taking a second run at Europe’s largest coatings company after a previous offer was rejected.

Exact details of the new proposal couldn’t immediately be learned. Akzo rebuffed PPG’s unsolicited 20.9 billion-euro (US$22.4 billion) takeover bid on March 9, saying the offer -- worth 83 euros a share at the end of February -- substantially undervalued the company.

PPG said at the time it would carefully evaluate its position, calling the original offer an “attractive and comprehensive proposal.”

Spokesmen for Akzo Nobel and Pittsburgh-based PPG declined to comment. Shares of the Amsterdam-based company climbed as high as 5.3% at the open of trading on Tuesday, and were trading 2.8% higher at 77.25 euros as of 9:05 a.m. local time. The stock is now at its highest on record.

One of the Dutch company’s biggest, long-term investors is urging Akzo to carefully evaluate any new bid from PPG, people familiar with the shareholder’s position said earlier, asking not to be identified because the discussions aren’t public.

Elliott Management Corp., the hedge fund founded by billionaire Paul Singer, is urging Akzo to talk with PPG about raising its bid, people familiar with those talks said last week.

Antitrust Scrutiny Assured

A combination of the world’s two largest coatings companies would attract intense antitrust scrutiny in Europe and the U.S. They have leading market shares of architectural paint in many European countries, with Akzo making brands such as Dulux and Hammerite and PPG producing Olympic and Pittsburgh brands.

The combination also would control more than half of the global aerospace-coatings market. Akzo has the No. 1 market position in general-industrial coatings and protective and marine coatings, while PPG has the No. 2 position in those markets, according to SunTrust analysts James Sheehan and Matthew Stevenson.

In rejecting the original bid, Akzo said it plans to divest its specialty chemicals business, which accounts for one-third of revenue, to increase the focus on coatings. PPG’s proposal carries “serious risks and uncertainties,” Akzo CEO Ton Buechner said at the time.

One of Buechner’s first major strategic decisions upon taking the helm in 2012 was to complete the sale to PPG of its U.S. architectural paints business, including 600 company-owned stores and the Glidden brand, for about $1 billion.

PPG's Largest Deal

PPG CEO Michael McGarry is attempting the company’s largest ever deal just 18 months into the top job. As chief operating officer in 2014, McGarry spearheaded the company’s $2.3 billion acquisition of Consorcio Comex SA, Mexico’s largest paintmaker.

Combinations between U.S. and European companies have a history of cultural and political challenges. PPG has met resistance to it proposed Akzo deal from the Dutch government. Like many Dutch companies, Akzo has in place a stichting, or foundation, which owns priority shares and can be used to fend off hostile takeovers.

Until now, Akzo and PPG have stayed on the sidelines amid a spate of large deals in the paint and chemicals industries. Sherwin-Williams Co. would become the biggest coatings maker if its $9.3 billion deal to buy Valspar Corp. goes through. The U.S. Federal Trade Commission is reviewing that takeover.

By Ed Hammond, Dinesh Nair and Ruth David

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