PPG Ends $28 Billion Pursuit of Rival Akzo Nobel -- Update
01 June 2017 - 9:09PM
Dow Jones News
By Ben Dummett
Paint giant PPG Industries Inc. dropped its $27.6 billion
takeover pursuit of Akzo Nobel NV Thursday, ending an unusually
bitter trans-Atlantic standoff between two of the world's oldest
industrial companies.
Akzo Nobel's board has " consistently refused to engage and did
not respond to our (latest) call or letter," PPG Chief Executive
Michael McGarry said in a statement. "As a result, we believe it is
in the best interests of PPG and its shareholders to withdraw our
proposal...at this time."
Akzo defended its standalone strategy, betting it will "lead to
a step change in growth," the company's Chief Executive Ton Büchner
said Thursday.
The capitulation marks a setback in PPG's efforts to strengthen
its global reach and offer customers a broader portfolio of paints
and coatings. Rivals, and the chemicals industry generally, have
been consolidating to boost profits with scale and
cost-cutting.
Sherwin-Williams Co. agreed last year to acquire Valspar Corp.
for $9.3 billion. Some analysts considered PPG's bid for Akzo to be
a strategic response to that pact. Meanwhile, U.S.-based Huntsman
Corp. last month agreed to merge with Switzerland's Clariant AG to
create a $14 billion chemicals company, producing an array of
products ranging from polyurethanes, pigments and automotive fluids
that are used in industries ranging from aerospace to household
cleaning.
Akzo's management and board have fought hard to preserve the
company's independence. Now it has prevailed, the Dutch paints and
chemicals maker faces increased pressure to prove that a
stand-alone strategy will work, especially to skeptical
shareholders who backed the deal talks. Akzo has promised to boost
dividend payouts and spin off the company's specialty chemicals
business.
That strategy, however, comes with its own risks. In 2015,
Syngenta AG, the Swiss agribusiness giant, fended off a $46 billion
cash-and-stock takeover bid from rival Monsanto Co., promising
shareholders it could deliver on the organic growth that it
considered preferable to a sale. But in 2016, China National
Chemical Corp. agreed to acquire Syngenta for $43 billion in an
all-cash offer.
Attacks on Akzo's management and board characterized the long
standoff with PPG. Bolstered by a Dutch corporate structure that
provides protection from a shareholder-supported hostile bid, Akzo
fended off three, increasingly higher takeover offers. It also out
survived a shareholder revolt led by U.S. activist investor Elliott
Management Corp.
Elliott, a top Akzo shareholder, urged the company to engage
with PPG in substantial talks. It also tried, unsuccessfully, in a
Dutch court to remove Akzo Chairman Antony Burgmans, who opposed a
combination.
An Elliott representative declined to comment Thursday.
PPG unveiled its second and final sweetened bid in April,
offering EUR24.6 billion ($27.6 billion) or EUR96.75 a share. That
represented a 50% premium to the Dutch company's stock price before
disclosure on March 9 of the initial $22 billion approach. It also
came with concessions such as employment guarantees and a
commitment to pay a fee if regulators blocked the tie-up--a bid to
allay the Akzo's concerns over potential job cuts and antitrust
opposition resulting from a deal.
In a May 29 letter addressed to Mr. Burgmans, PGG's Mr. McGarry
said his company would be willing to consider increasing its offer
price again if Akzo agreed to friendly talks.
Write to Ben Dummett at ben.dummett@wsj.com
(END) Dow Jones Newswires
June 01, 2017 06:54 ET (10:54 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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