Issue Date: May 15, 2017 | Web Date: May 11, 2017
PPG says AkzoNobel didn’t give its third bid a fair hearing
Paint giant PPG Industries is weighing its options now that AkzoNobel has rejected its third takeover proposal. PPG hasn’t said whether it will pursue a hostile bid—no easy task when a Dutch firm is the target. But it is open to further talks with AkzoNobel’s management.
On May 8, AkzoNobel rejected PPG’s latest acquisition offer, saying it intends to move forward with its own plan to sell or spin off its chemical business within 12 months.
PPG’s offer was valued at $28.8 billion in cash and stock. It also promised to pay AkzoNobel a “significant” fee should antitrust regulators block the deal because of the overlap in the two firms’ core paint businesses.
The offer led to a May 6 meeting involving AkzoNobel executive chair Ton Büchner, AkzoNobel supervisory board chair Antony Burgmans, PPG CEO Michael McGarry, and PPG lead independent director Hugh Grant, who is also CEO of Monsanto. AkzoNobel had previously refused to discuss a deal with PPG.
On the basis of the meeting and its own review of the proposal, AkzoNobel claims the bid undervalues the company. AkzoNobel also worries about the 18 months of regulatory review the deal would likely require and the uncertainty the combination would create for its 46,000 workers.
The May 6 meeting has become a bone of contention. In a statement, PPG complains that it was less than 90 minutes long and more of a listening session for the AkzoNobel managers than a back-and-forth discussion. “Specifically, the AkzoNobel chairs stated up front that they did not have the intent nor the authority to negotiate,” PPG says.
Confronted about PPG’s assertions, Büchner told reporters on a conference call that the gathering was part of its evaluation process. “We went into the meeting with an open mind,” he said.
In a follow-up statement, PPG invited AkzoNobel to more talks. “The remaining questions raised by AkzoNobel are common negotiation points and can be quickly and reasonably resolved through an open, substantive, two-way dialogue in which both parties are motivated and engaged,” McGarry wrote. “AkzoNobel, however, has chosen not to engage in meaningful discussions.”
A hostile takeover of AkzoNobel would be tough. Like many Dutch companies, it has a “stichting,” a foundation of people who hold a special class of shares. These shareholders can appoint AkzoNobel’s management and supervisory boards over the objection of regular shareholders, many of whom want the firm to negotiate.
The most outspoken shareholder, the hedge fund Elliott Advisors, has filed a petition with a Dutch court of appeals seeking an extraordinary general meeting where shareholders could vote to oust Burgmans.
Citing the brevity of the meeting between the two firms, Elliott argues that AkzoNobel isn’t performing its fiduciary duty to evaluate the deal. The meeting, it says, “was conducted for the sole purpose of being able to claim to have ‘met’ and ‘engaged’ with the relevant party.”
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