PPG Industries bid for Akzo Nobel increased to £22.4 billion!

PPG has increased its offer for Akzo Nobel with criticisms of Dutch paint company’s performance, strategies for thriving without PPG partnership

akzonobel hq
AkzoNobel headquarters in Amsterdam, Netherlands.

This is the third offer by PPG Industries to acquire AkzoNobel. The first offer of £17.14 billion was rejected, as was the £20.49 billion second offer. The US group has warned the third offer will be the last friendly bid!. However AkzoNobel’s board didn’t immediately reject the latest offer as they did with the first two. This time they announced they would “carefully review and consider this proposal.”

akzo-nobel-chief executive ton büchner
AkzoNobel Chief Executive Ton Büchner.

PPG said it’s prepared to sell off parts of its business if necessary to complete the transaction. It would have dual listings of the combined company’s shares on both the New York and Euronext Amsterdam Stock Exchanges.

ppg industries headquarters
PPG Industries Headquarters, Pittsburgh, Pennsylvania USA.

Ton Büchner, AkzoNobel CEO, initially cited the potential for forced divestitures of business units to satisfy regulators. This is why he felt the deal would not in the best interests of shareholders and employees alike. He also voiced concerns about job cuts to eliminate overlapping product lines. Cultural differences such as dedication to charitable giving were more reasons why he thinks it would be a bad deal.

In response the Pittsburgh company has said it won’t relocate any of AkzoNobel’s European production plants to the US. In his latest bid Michael McGarry, PPG Chairman and CEO, stated the £22.4 billion figure is “one last invitation to you and the AkzoNobel boards to reconsider your stance and to engage with us on creating extraordinary value and benefits for all of AkzoNobel’s stakeholders.”

McGarry’s letter said:

“Our revised proposal represents a second increase in price along with significant and highly-specific commitments that we are confident AkzoNobel’s stakeholders will find compelling. We stand ready to work with you expeditiously to complete a targeted due diligence review and to negotiate a definitive agreement for the combination.”

AkzoNobel is primarily an industrial coatings company. However its also involved in powder coating and wet coating for the automotive and commercial vehicle industries. These are markets that PPG already dominate in North America. PPG officials promised they would fight any breakup demands from regulators and maintain strong community ties in The Netherlands.

With regard to the employees, PPG officials also pledged that “no AkzoNobel employee currently working at AkzoNobel’s speciality chemicals plant will lose their job as direct result of this acquisition.”

PPG also will commit to respecting current union contracts, buyout plan terms, and return rights for workers who have been laid off by AkzoNobel. Mr McGarry said he would be “delighted” to legally enshrine the commitments that PPG had made around factories and jobs.

Following latest developments Elliott Advisors, an American hedge fund management firm, is leading other shareholders in an attempt to oust AkzoNobel Chairman, Antony Burgmansr. Its thought they are keen to push the deal through irrespective of the consequences for the European employees.

In a statement, Akzo said:

“The request is irresponsible, disproportionate, damaging and not in the best interests of the company,” Akzo said. “Given the sole agenda item, there is no legal basis for calling an EGM.”

Antony Burgmansr is former Chairman and CEO of Unilever N.V. and plc, former Chairman of TNT Express N.V. and a member of the Supervisory Board of Jumbo Group Holding B.V. His fellow board members have pledged their full confidence in him.

Mr Burgmans, speaking at AkzoNobel’s AGM on Tuesday said, the company is not yet ready to respond to the third bid and such matters take time. AkzoNobel repeated the takeover would result in job losses and it has the backing of the Dutch government in resisting PPG Industries bid.

Henk Kamp, the Dutch economic affairs minister, told Dutch radio on Tuesday:

“For the Dutch economy, it is good that the leadership of AkzoNobel, both the management board and the supervisory board, is planning to remain independent, and I support that.”

AkzoNobel Bio-steam Facility at Delfzijl and open a new Wirral based AkzoNobel Supported Paint Re-manufacturing Centre opens in Wallasey.

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