PPG Ends $28 Billion Pursuit of Rival Akzo Nobel -- Update

By Ben Dummett 

Paint giant PPG Industries Inc. dropped its $27.6 billion takeover pursuit of Akzo Nobel NV Thursday, ending an unusually bitter trans-Atlantic standoff between two of the world's oldest industrial companies.

Akzo Nobel's board has " consistently refused to engage and did not respond to our (latest) call or letter," PPG Chief Executive Michael McGarry said in a statement. "As a result, we believe it is in the best interests of PPG and its shareholders to withdraw our proposal...at this time."

Akzo defended its standalone strategy, betting it will "lead to a step change in growth," the company's Chief Executive Ton Büchner said Thursday.

The capitulation marks a setback in PPG's efforts to strengthen its global reach and offer customers a broader portfolio of paints and coatings. Rivals, and the chemicals industry generally, have been consolidating to boost profits with scale and cost-cutting.

Sherwin-Williams Co. agreed last year to acquire Valspar Corp. for $9.3 billion. Some analysts considered PPG's bid for Akzo to be a strategic response to that pact. Meanwhile, U.S.-based Huntsman Corp. last month agreed to merge with Switzerland's Clariant AG to create a $14 billion chemicals company, producing an array of products ranging from polyurethanes, pigments and automotive fluids that are used in industries ranging from aerospace to household cleaning.

Akzo's management and board have fought hard to preserve the company's independence. Now it has prevailed, the Dutch paints and chemicals maker faces increased pressure to prove that a stand-alone strategy will work, especially to skeptical shareholders who backed the deal talks. Akzo has promised to boost dividend payouts and spin off the company's specialty chemicals business.

That strategy, however, comes with its own risks. In 2015, Syngenta AG, the Swiss agribusiness giant, fended off a $46 billion cash-and-stock takeover bid from rival Monsanto Co., promising shareholders it could deliver on the organic growth that it considered preferable to a sale. But in 2016, China National Chemical Corp. agreed to acquire Syngenta for $43 billion in an all-cash offer.

Attacks on Akzo's management and board characterized the long standoff with PPG. Bolstered by a Dutch corporate structure that provides protection from a shareholder-supported hostile bid, Akzo fended off three, increasingly higher takeover offers. It also out survived a shareholder revolt led by U.S. activist investor Elliott Management Corp.

Elliott, a top Akzo shareholder, urged the company to engage with PPG in substantial talks. It also tried, unsuccessfully, in a Dutch court to remove Akzo Chairman Antony Burgmans, who opposed a combination.

An Elliott representative declined to comment Thursday.

PPG unveiled its second and final sweetened bid in April, offering EUR24.6 billion ($27.6 billion) or EUR96.75 a share. That represented a 50% premium to the Dutch company's stock price before disclosure on March 9 of the initial $22 billion approach. It also came with concessions such as employment guarantees and a commitment to pay a fee if regulators blocked the tie-up--a bid to allay the Akzo's concerns over potential job cuts and antitrust opposition resulting from a deal.

In a May 29 letter addressed to Mr. Burgmans, PGG's Mr. McGarry said his company would be willing to consider increasing its offer price again if Akzo agreed to friendly talks.

Write to Ben Dummett at [e-mail]

(END) Dow Jones Newswires

June 01, 2017 06:54 ET (10:54 GMT)

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