SHW Sherwin Williams

By Dana Mattioli and David Benoit 

Activist investor Elliott Management Corp. owns a stake in Akzo Nobel NV and is pushing the Dutch paint maker to engage in talks with suitor PPG Industries Inc., according to people familiar with the matter.

Elliott has owned a stake since 2016, and had wanted Akzo to separate its specialty-chemicals business, a move the company said it would consider last week as it rejected a $22.1 billion takeover offer from PPG. But now Elliott wants Akzo to consider a sale too, though only at a higher price than the EUR83 a share ($89.17) PPG offered, the people said.

In its rejection, Akzo said the bid from PPG "substantially undervalues" the company. It went on to say, in notably strong language, that the offer "is not in the interest of its stakeholders, including its shareholders, customers and employees," and that it "carries significant delivery and timing risk for shareholders, both in relation to substantial antitrust issues, pension schemes and the achievability of proposed synergies."

Elliott has expressed concerns to Akzo management that it didn't engage with PPG and that it didn't consult the hedge fund, which owns less than 3% of Akzo -- the reporting threshold in the Netherlands.

PPG has made clear it is still interested in a deal with Akzo, saying in a statement last week that it "continues to believe there is a strong strategic rationale for the proposed transaction between PPG and Akzo Nobel and will carefully evaluate and consider its position and path forward related to its proposal."

As of Friday, the company hadn't made a revised offer for Akzo, one of the people said.

Nevertheless, the revelation that Elliott is on Akzo's shareholder register could increase the odds of a sale of the company. Elliott is a well-known activist that is managed to shake up boardrooms and trigger sales and other major changes at a succession of companies in recent years.

In a sign that investors are already hopeful there will be a deal, Akzo's shares closed Friday in Amsterdam at EUR75.21, up more than 15% and near their high since last week.

Elliott believes the company should engage with PPG and at the same time explore separating the specialty-chemicals business, the people said. It has also raised concerns to management about the performance of Akzo stock, which before the bid was little changed in a decade.

Elliott, a $30 billion New York hedge fund, has a history of agitating for European mergers. Its London office has taken stakes in several companies and either pushed them to agree to a sale or forced a bidder to pay more.

Pittsburgh-based PPG, with paint brands including Pittsburgh Paints, Olympic and Glidden, is seeking a tie-up a year after rival Sherwin-Williams Co. agreed to buy Valspar Corp. for more than $9 billion.

There have been a number of tie-ups in the broader chemicals industry too. U.S. giants Dow Chemical Co. and DuPont Co. are seeking to complete a roughly $60 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 agreed to a roughly $30 billion merger late last year.

Write to Dana Mattioli at dana.mattioli@wsj.com and David Benoit at david.benoit@wsj.com

(END) Dow Jones Newswires

March 17, 2017 16:48 ET (20:48 GMT)

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