Rejecting PPG bid, AkzoNobel will exit chemicals

AkzoNobel has rejected an unsolicited takeover offer from PPG Industries and says it will instead embark on a program to separate its specialty chemical business from its main business in paints and coatings.

PPG privately proposed on March 2 to acquire AkzoNobel in a deal that would value the Dutch company at about $22 billion. AkzoNobel says it rejected the proposal as not in the interests of its stakeholders.

PPG says it will consider its path forward. AkzoNobel’s stock rose more than 15% after the disclosures, indicating that investors are betting PPG will come back with a higher offer.

PPG and AkzoNobel each have annual sales of roughly $15 billion. And the two companies have done business before. In 2013, PPG acquired AkzoNobel’s North American decorative coatings business for about $1 billion.

Both companies are largely paint makers that also operate chemical businesses. Both have pared back their chemical operations—PPG through the sale of its chlor-alkali operations in 2012 and Akzo​Nobel through the sale of its catalyst business in 2004.

Still, AkzoNobel continues to be a major player in chemicals, with a specialty chemical business that had sales of $5.1 billion last year. The company considers itself to have leadership positions in markets such as surfactants, polymer chemistry, pulp processing, and chlor-alkali.

According to AkzoNobel CEO Ton Büchner, PPG’s bid “brought forward” a plan to separate the chemical business. Taking the step now will allow AkzoNobel to “unlock the value within our company ourselves” rather than submit to an acquisition that substantially undervalues the firm, he says.

Future options for the chemical business include establishing it as an independent company. PPG did not say if it intends to keep the chemical operation if it ultimately succeeds in its bid for AkzoNobel.A successful

PPG bid for all of AkzoNobel would continue a relentless wave of consolidation in the chemical and allied industries. Dow Chemical and DuPont are pushing to complete their historic merger by the end of the first half of the year. The industrial gas giants Praxair and Linde plan to merge. Bayer is advancing its acquisition of agricultural products rival Monsanto. And ChemChina is close to completing its acquisition of Syngenta.