TiO2: AkzoNobel spurns PPG again, doubles down on spin-out plans

Published: Friday, 09 June 2017

Third unsolicited bid rebuffed; PPG’s offer ‘undervalues company’; AkzoNobel confirms own spin out plans

The Dutch paint and chemical business AkzoNobel rebuffed another unsolicited take-over bid from US paint group PPG, the third such offer in two months.

AkzoNobel, the producer of Dulux paint, instead reiterated its intention to spin out its speciality chemicals business into a free-standing entity, a move it said would "accelerate growth" in its paints and coatings segments.

The €26.9bn ($29.7bn) offer, of cash and shares equivalent to €96.75 per AkzoNobel share at time of announcement, was an increase of some 17% from PPG’s first offer, made back in March, and represents a 50% premium to the AkzoNobel’s share price before the first approach.

Speciality chemicals

But AkzoNobel’s chief executive, Ton Buchner, said the offer undervalues the company.
In particular, the company said that the offer fails to take into account a strategy to spin out the speciality chemicals business "to enable an acceleration of growth and enhanced profitability".

This separation of the speciality chemicals business was announced in response to the PPG’s last bid, back in March, and is supposed to be completed within 12 months.

The separation, which AkzoNobel has said could lead to a separate listing of the new chemical business, is aimed at raising capital for return to shareholders, including activist investor shareholders who have been vocal in endorsing the PPG bid.

Plant closure concerns

As well as raising its offer, PPG’s latest approach had attempted to ease concerns over plant closures.  

The revised offer included a pledge not to relocate production away from Europe to the US, after AkzoNobel previously cited concerns of plant closures as a reason to reject the takeover.

And PPG said there would be no job losses at AkzoNobel’s speciality chemicals plant in the Netherlands.

Despite this, AkzoNobel said the offer "provides limited visibility in relation to the closing of the transaction and subsequent integration of the two businesses".

PPG indicated that divestitures might be necessary to comply with anti-monopolies legislation, saying it was "ready to commit to a mutually agreed level of divestitures as may be reasonably necessary to meet those requirements."

But the Dutch company warned that the takeover "would require substantial and complex structural changes and be vulnerable to regulatory-led delays," suggesting that regulatory hurdles could take 18 months to complete.

This article from Industrial Minerals magazine June issue was first published online on 8 May 2017.