PPG makes third and ‘last’ offer to buy AkzoNobel

PPG Industries has made a third offer to acquire fellow paint producer AkzoNobel, this time for $28.8 billion. PPG had already offered to buy the Dutch firm for $26.3 billion, but its advances were firmly rejected.

The latest offer represents a premium of around 50% over AkzoNobel’s share price in March, before PPG’s first bid was made public. AkzoNobel will say only that under Dutch regulations it will carefully review and consider the proposal.

PPG’s new offer continues a game of cat and mouse between the two companies. AkzoNobel’s CEO Ton Büchner refused to talk with PPG’s management team about the two previous offers because he said they undervalue the company. He also said any deal was in danger of being derailed by regulatory bodies and could lead to cuts.

Unlike in its previous two offers, though, this time PPG says it is prepared to give AkzoNobel a “significant” but as yet undisclosed fee should the two companies strike a deal but competition authorities block it. Additionally, PPG has agreed to protect pensions, jobs, and the Dutch firm’s headquarters.

Investors such as the activist shareholder Elliott Advisors had been pressuring Büchner to talk with PPG even before the latest offer. Analysts contend that AkzoNobel will now be forced to come to the negotiating table.

“PPG has threatened a hostile bid if this does not elicit a negotiation. That will probably not be necessary,” says John Colley, a professor at England’s Warwick Business School.

PPG’s new offer comes just days after Büchner detailed plans to divest AkzoNobel’s chemicals business within 12 months, leaving it with only paints and coatings activities. Büchner told AkzoNobel shareholders that the move would create more value than PPG’s offer at the time.

PPG counters that its latest offer is “vastly superior” to AkzoNobel’s plan. It predicts that combining the two companies will create $750 million per year in cost savings.

If PPG doesn’t succeed in acquiring AkzoNobel with its latest offer, it may mount a subsequent challenge. The U.S. firm may opt to relaunch its offer in 2018 or 2019 once AkzoNobel’s chemicals divestment is out of the way, the investment banking firm Jefferies predicts.