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PPG makes third and “last” offer to buy AkzoNobel

Paint firm’s $28.8 billion offer comes with conditions to smooth the way

by Alex Scott
April 24, 2017

Photo of pots of paint.
Credit: AkzoNobel
Analysts expect discussions between the two paints firms to ensue.

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

The latest offer represents a premium of around 50% over AkzoNobel’s share price back in March, before PPG’s first bid was made public.

AkzoNobel has chosen not to comment on the latest offer but says that under Dutch regulations it will carefully review and consider the proposal.

PPG’s new offer follows a game of cat and mouse between the two companies. AkzoNobel’s CEO Ton Büchner had been refusing to talk with PPG’s management team about the two previous offers because he said they undervalued the company. He also said that any deal between the two firms risked being derailed by regulatory bodies and could lead to job cuts.

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

Büchner had already been under pressure to discuss terms with PPG before the latest offer. Activist shareholder Elliott Management has been pressing the two paints producers to enter negotiations.

Analysts think PPG’s latest offer will be enough to force AkzoNobel’s management 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 business professor for England’s Warwick Business School.

PPG’s new offer comes just days after Büchner detailedplans to divest AkzoNobel’s chemicals business within 12 months, a move that would leave the firm with only paints and coatings activities. Büchner had told AkzoNobel shareholders that this would return more money to them than PPG’s offer at the time of $26.3 billion.

PPG says, though, that its latest offer is “vastly superior” to AkzoNobel’s new stand-alone plan. PPG predicts that by combining the two companies it would add $750 million to the top line annually through synergies.

Even if PPG doesn’t succeed in acquiring AkzoNobel with its latest offer, analysts predict the firm may mount a subsequent challenge. If AkzoNobel refuses the offer, PPG may opt to retreat and relaunch its offer in 2018-2019 once the chemicals divestment is out of the way, forecasts the investment banking firm Jefferies.



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