PPG raises offer AkzoNobel takeover $29 billion

PPG raises offer for AkzoNobel takeover to $29 billion

6:06 AM, 25th April 2017
Michael McGarry, CEO of PPG Industries.
Michael McGarry, CEO of PPG Industries. (File photo)

PITTSBURGH, US: PPG Industries Inc has raised its proposed offer for AkzoNobel NV by about 8 percent to €26.9 billion ($28.8 billion) increasing the pressure on its Dutch rival to enter into talks.

PPG said this proposal was a final invitation to AkzoNobel to enter negotiations and included a break fee in case the deal was rejected by regulators - attempting to address a concern that AkzoNobel raised when it rejected two previous proposals from PPG.

The move turns up the heat on AkzoNobel ahead of its annual meeting where it will face a group of shareholders unhappy it has not engaged with PPG. Shares in AkzoNobel, the maker of Dulux paint, jumped as much as 6 percent to a record high of €82.95 following the improved proposal.

The shareholders, led by hedge fund Elliott Advisors, said AkzoNobel should at least open exploratory talks with Pittsburg-based PPG.

"I think it's important for them to do the due diligence and to sit down and listen to us," PPG CEO Michael McGarry said in an interview. "They have run out of excuses to throw on the table to say why they shouldn't."

He said PPG believed the deal would add to its earnings from the first year and given the support from AkzoNobel shareholders, the US firm would submit a formal offer to the Dutch financial markets regulator by June 1, regardless of what AkzoNobel does.

AkzoNobel confirmed it had received a "third unsolicited proposal" from PPG but was non-committal in its response.

Analysts from Morgan Stanley said it was noteworthy AkzoNobel had not rejected the bid out of hand, and that PPG had made significant concessions - not only on the break fee but also on employment, pension plans, research and development spending and the location of production facilities.

"This is the first time AkzoNobel has said it will review an offer from PPG, although we will have to wait and see what decision is ultimately made", the analysts said in a note.

Elliott, which holds a 3.25 percent stake in AkzoNobel, said the PPG offer was worth more than the value AkzoNobel could achieve as an independent company.

The activist investor urged AkzoNobel’s boards to enter talks with PPG, saying a hostile bid might not include the same guarantees for stakeholders such as shareholders and employees.

"Elliott, therefore, believes that friendly discussions now are in the best interest of all," it said in a statement.

Columbia Threadneedle Investments, a top-20 investor in AkzoNobel with a 0.77 percent stake, said in a statement AkzoNobel's boards had "no room for excuses now and must enter into proper discussions with PPG".

PPG said its new proposal was worth €96.75 per AkzoNobel share, comprised of €61.50 in cash, 0.357 shares of PPG common stock and dividends worth €7.78.

That's a 50 percent premium to AkzoNobel's closing price of 64.42 on March 8, the day before PPG confirmed it had made a proposal to buy AkzoNobel at €80 per share.

A second proposal worth €90 per share on March 20 was rejected within 48 hours, with AkzoNobel arguing it substantially undervalued the company and would be bad for other stakeholders, such as employees and customers.

"I do not see how AkzoNobel's board can now not engage," said Michael Wegener, managing partner at hedge fund Case Equity Partners, which has invested 6.7 percent of its assets in AkzoNobel.

"If they don't, PPG is very likely to take this directly to shareholders."

Last week, AkzoNobel presented its case for remaining independent, offering shareholders €1.6 billion in extra dividends and detailing plans to sell or float its chemicals subsidiary, which represents a third of company sales and profits, within one year.

Both moves, if completed, would make AkzoNobel a less attractive target for PPG, although the US company has said the primary reason for the takeover would be synergies of $750 million between the companies' paints and coatings businesses.

© Reuters News

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