Akzo will spin out chemicals to avoid PPG takeover
April 19, 2017 8:34 AM
Getty Images/Corbis Documentary
PPG Industries building in Downtown Pittsburgh
By Joyce Gannon / Pittsburgh Post-Gazette
AkzoNobel, the Dutch paints and chemicals business trying to stave off a takeover by Pittsburgh coatings company PPG, on Wednesday unveiled a strategy to unlock value for its shareholders on its own instead of being acquired.
As expected, Akzo’s plan focuses on selling its chemicals unit or listing the business in a stock offering — and returning most of the proceeds to shareholders.
The Amsterdam-based maker of Dulux, Sikkens and other paints also promised shareholders dividends totaling 1.6 billion euros ($1.7 billion) this year, including a special dividend of 1 billion euros in November.
Downtown-based PPG, whose brands include Glidden, Olympic and Pittsburgh Paints, maintained that Akzo shareholders would reap far greater value from an acquisition that would create the largest coatings business in the world.
Akzo’s shares closed at 78.53 euros, up 21 cents, but still well below PPG’s latest offer of 90 euros per share.
In a statement issued after Akzo delivered its plan to an investor conference in London, PPG said it “listened carefully … and we continue to believe in the merits of combining the two companies.”
PPG said Akzo’s plan “will be more risky and create more uncertainty for AkzoNobel stakeholders” because it “would create two smaller, unproven companies and result in additional restructuring.”
The Akzo plan was also criticized by hedge fund Elliott Management which is leading a push by shareholders to have the Dutch company meet with PPG and negotiate a deal. Elliott has also called on Akzo to hold a special meeting to oust its chairman, Antony Burgmans.
Ton Buechner, Akzo’s chief executive, said Wednesday he had no updates on whether a meeting would occur.
Detailing plans for his company to remain independent, Mr. Buechner said Akzo believes it can sell or spin out the chemicals business within 12 months. That unit accounts for about one-third of Akzo’s revenues and is valued at between 8 billion and 12 billion euros. ($8.6 billion-$12.9 billion).
The company expects to save 50 million euros annually from by separating chemicals and is targeting 150 million euros in annual savings from cost improvement programs in its coatings business.
PPG has said its deal would deliver $750 million in cost synergies by combining warehousing, distribution and raw material purchasing for the two coatings giants.
Among its other arguments in favor of the deal, PPG noted that in the last decade, it provided shareholder return of 282 percent compared with 87 percent for Akzo shareholders.
PPG shares closed at $105, up 26 cents. The company will hold its annual shareholders meeting Thursday at the Fairmont Pittsburgh, Downtown, after it releases first quarter results.
Akzo’s announced first quarter earnings Wednesday that beat analysts’ estimates, with profits up 13 percent. It expects operating profit to grow by 100 million euros for all of 2017.
Though PPG hasn’t been able to score a meeting with Akzo, the Dutch Federation of Dutch Trade Unions said it would like to hold discussions with the Pittsburgh company because Akzo’s plan as well as an acquisition by PPG would likely lead to job cuts.
Joyce Gannon: firstname.lastname@example.org or 412-263-1580.
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