Orkla May Target Paintmaker Tikkurila, Danske Markets Says

Orkla ASA, the Norwegian maker of frozen pizza and bathroom cleaners, may be preparing a takeover bid for Finnish paintmaker Tikkurila Oyj, according to Danske Bank A/S.

An offer for the company is possible in the next six to 12 months, analyst Panu Laitinmaki said today in a note to clients. Danske maintained its “Hold” recommendation on the shares given the potential for an approach.

A move by Orkla, which declared a 6.2 percent stake in Tikkurila in August, would coincide with an expected slowdown in demand for paint, coupled with inflated prices for the raw material titanium dioxide. Akzo Nobel NV, the world’s largest paintmaker, plans a renewed efficiency drive after a “challenging” few months, the Amsterdam-based company said July 21. Tikkurila itself faces an increased risk of cutting its profit outlook this year, Laitinmaki said.

“We keep our ‘‘Hold’’ despite the weakening outlook because a takeover bid by Orkla seems possible in the next 12 months,” the analyst said.

Tikkurila shares dropped 3.6 percent to 12.22 euros in Helsinki trading as of 11:29 a.m. local time, weighed down by a wider rout in global equity markets. The shares have lost 26 percent this year, valuing the company at 540 million euros ($712 million).

Good Relations With Jotun

Orkla last month abandoned a $933 million bid for the remaining shares it doesn’t own in paintmaker Jotun AS after members of the Gleditsch family blocked the approach. The two sides are working on developing Jotun together, Jotun Chairman Odd Gleditsch said today by telephone.

“The relationship is good,” Gleditsch said. “We agree on the strategy.”

For Orkla, the two holdings in the rival paintmakers are "completely separate," with the Tikkurila stake being a financial investment, investor relations head Rune Helland said by phone.

Orkla owning a 6.2 percent stake in Tikkurila is acceptable to Jotun because they have been assured it’s a "purely financial" move, said Gleditsch, who is also on Orkla’s board. There is no risk of Orkla gaining a Tikkurila board seat with the size of their current holding, as competition between Jotun and Orkla wouldn’t be acceptable, he said.

With a 22 percent net debt to equity ratio at the end of the second quarter, Orkla’s gearing would increase to about 35 percent if it buys Tikkurila at 17 euros a share, Danske’s Laitinmaki said in the note.