PPG Makes $22 Billion Offer for AkzoNobel, Is Rejected-- 6th Update
March 09 2017 - 8:22AM
Dow Jones News
By Christopher Alessi in Frankfurt and Ian Walker in London
Dutch paints and chemicals maker Akzo Nobel NV said Thursday it
has rejected an unsolicited EUR20.9 billion ($22.1 billion) offer
from U.S. peer PPG Industries Inc., setting up a trans-Atlantic
standoff that pits two of the world's oldest industrial giants amid
a wave of consolidation in the sector.
Amsterdam-based Akzo, whose shares were up more than 17%
Thursday afternoon, said the offer prompted it to explore selling
off its specialty-chemicals division.
Akzo said PPG made an offer of EUR54 in cash and 0.3 PPG shares
for each Akzo share, corresponding to a value of EUR83 a share.
Akzo--which counts Dulux, Sikkens, Interpon and Eka among its
brands--said PPG's proposal substantially undervalues the company.
The Akzo board carefully reviewed PPG's proposal and unanimously
rejected it, the Dutch company said.
PPG--whose brands include Pittsburgh Paints, Olympic and
Glidden--confirmed the proposal, saying it continues to believe in
the strategic rationale for the deal and that it would now consider
its next steps. It added that a combination would bring together
complementary products and technologies, as well as strengths in
different parts of the world.
The offer comes amid a period of consolidation in the chemicals
industry. U.S. giants Dow Chemical Co. and DuPont Co. are in the
process of completing a $120 billion merger, and have offered to
sell businesses to gain approval from the European Union's
antitrust regulator.
Industrial gas giant Praxair Inc. and Germany's Linde AG created
a combined entity worth $66.6 billion after it agreed to a merger
in December.
Other potential tie-ups in the broader chemicals sector include
Bayer's planned $57 billion takeover of U.S. agrochemical giant
Monsanto Co. and China National Chemical Corp.'s planned $43
billion acquisition of Swiss seed company Syngenta AG.
Akzo Chief Executive Ton Büchner said PPG's approach had
prompted Akzo to announce plans to explore separating its
specialty-chemicals business, including establishing the unit as an
independent listed entity. The business, which reported revenue of
EUR4.8 billion in 2016, produces a range of chemicals used in
construction, industrial and consumer goods.
"The proposal contains serious risks and uncertainties," Mr.
Büchner said in a statement. "I firmly believe that Akzo Nobel is
best placed to unlock the value within our company ourselves."
The spurned offer sets up a standoff between two of the world's
oldest industrial companies. Akzo Nobel was created in 1994 from
the merger of paint and chemicals companies in Sweden and the
Netherlands that dated back more than a century, including a
chemicals firm founded by Alfred Nobel, who launched the prizes
that bear his name. Akzo later acquired two of Britain's oldest
paint and chemicals firms.
PPG, founded in 1883 as Pittsburgh Plate Glass Co., was the
first U.S. company to successfully market large sheets of glass,
until then an expensive rarity. It quickly expanded into chemicals
to secure a supply of raw materials and was an early supplier of
the automotive and aviation industries.
Mr. Büchner, who took over the top job at Akzo in 2011, has
presided over a comprehensive restructuring and led the company
back to profitability. But he has in the past resisted separating
the specialty-chemicals unit because it has been the group's "cash
cow," said Markus Mayer, an analyst with Germany's Baader Bank.
"The market would love that Akzo would spin off specialty
chemicals," Mr. Mayer added.
Analysts and investors seemed to support the idea of a PPG
takeover of the Dutch company, which employs 46,000 people in
around 80 countries.
A tie-up would be "credible and potentially powerful," analysts
at Bernstein Bank said. Analysts at Citigroup agreed but noted that
the overlap of some business areas could raise antitrust concerns
in Europe.
After a record year of mergers and acquisitions activity in the
industry, consolidation is likely to continue in chemical
industries across the board, Baader's Mr. Mayer said. He cited a
low-growth environment, cheap financing and overcapacity in many
markets.
Thursday's proposal isn't the first time PPG has courted Akzo.
In 2012, the Pittsburgh-based company bought Akzo's North American
house-paint business for $1.05 billion.
In December, PPG launched a restructuring program in an effort
to save $120 million to $130 million a year because of a slowdown
in global demand and weaker-than-expected growth in Europe.
Akzo became one of the world's largest paint makers after it
acquired U.K. rival Imperial Chemical Industries Ltd. in 2008 for
GBP8 billion ($12.9 billion). But the Dutch company struggled to
digest the debt-financed acquisition, which raised its exposure to
Europe's troubled automotive and construction industries,
culminating in a series of profit warnings in 2011. It has since
slashed costs and laid off staff.
At close of business Wednesday, Akzo had a market capitalization
of $17.12 billion, while PPG's was $27.47 billion.
Write to Christopher Alessi at christopher.alessi@wsj.com and
Ian Walker at ian.walker@wsj.com
(END) Dow Jones Newswires
March 09, 2017 08:07 ET (13:07 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
Dow (NYSE:DOW)
Historical Stock Chart
From Aug 2024 to Sep 2024
Dow (NYSE:DOW)
Historical Stock Chart
From Sep 2023 to Sep 2024