Shareholders of Dutch paint maker Akzo Nobel are putting pressure on the company to open talks with US rival PPG Industries after Akzo did not accept a revised takeover offer. Akzo said that the deal—worth 22.7 billion euro—was too low but also too risky and did not fit with the company’s culture.
Now, Akzo Nobel does want to separate its business in specialty chemicals in order to concentrate on paints. This also happens to be the focus of competitor—and one-time-potential-buyer—PPG. Akzo Nobel confides, however, that there are a great many execution risks and anti-trust issues associated with any deal with PPG and this could result in expected substantial divestures as well as significant job cuts.
Akzo Nobel CEO Ton Büchner advises, “We are convinced that AkzoNobel is best placed to unlock the value within our company ourselves. We are executing our plan, including the creation of two focused businesses and new cost structure, and believe this gives us a strong platform for continued profitability and long term value creation for all our stakeholders with substantially less execution risks.”
The question, here, is really whether or not the company can profit from the shift. Indeed, the company insists that it is in the best interests of staff and investors to spin off its chemical division and then remain independent. Akzo Nobel has its target set at 9 to 11 percent on sales during the period up to 2018 with an ROI target between 13 and 16.5.
Büchner notes, “PPG’s first proposal came during an election campaign, at a time of high sensitivity,” pointing specifically to cultural differences that, he claims, would hinder the merger.
According to VEB director Paul Koster, “The second offer addressed many of Akzo’s concerns about research and development, jobs and the firms’ cultures, so they should at least discuss it,” his views certainly echoing those of several large institutional shareholders.
Koster goes on to say, “It’s good to understand what’s happening so you can know if (a merger) might not be a good idea,” further suggesting the terms of the PPG offer implies that any deal would, essentially, be a “merger of equals”.
Now, PPG claims its offer was worth roughly 90 euros per share; that is to say if Akzo’s dividend payments were to be included