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Akzo CEO’s Fatigue Has Investors in Limbo Over Future Plan

Akzo Nobel NV Chief Executive Officer Ton Buechner
Akzo Nobel NV Chief Executive Officer Ton Buechner joined Akzo’s executive committee at the start of the year, bolstered by his reputation for overhauling Swiss pump maker Sulzer AG. Photographer: Tessa Posthuma de Boer/Akzo Nobel NV via Bloomberg

Akzo Nobel NV Chief Executive Officer Ton Buechner’s need to extend leave for fatigue six months into the job creates a leadership vacuum as investors await a new strategy for the world’s biggest paintmaker.

Members of the supervisory board will discuss Buechner’s latest medical reports on Oct. 17, and update investors “in due course,” spokesman Tim Van der Zanden said by phone late yesterday. The focus of next week’s meeting will likely be planning a future without the 47 year-old, according to ING analyst Fabian Smeets.

Buechner joined Akzo’s executive committee at the start of the year, bolstered by his reputation for overhauling Swiss pump maker Sulzer AG. He traveled globally to see operations spanning chemicals, Dulux paint and industrial coatings, building a strategic vision for release at an investors’ meeting this month in London that’s now been canceled.

“It’s over and out for Buechner, I don’t think he’ll come back,” said Amsterdam-based Smeets, who has a “hold” rating on the Akzo stock. “My guess is they will make a final decision on Wednesday. Nothing is going to happen in the next six months. They will also have to find a new CEO so it might take up to a year before Akzo will make any announcement on its strategy going forward.”

Akzo shares dropped 4 percent to 42.98 euros in Amsterdam as of 9:25 a.m., their lowest level since July 19. The decline widens the gap in performance with competitors, bringing the year-to-date advance to 15 percent. PPG Industries Inc. has climbed 39 percent, rewarded for its decision to exit a commodity chemicals business. Another U.S. paintmaking rival, Sherwin-Williams Co., is up 67 percent.

Restructuring Case

Buechner will also miss the presentation of third-quarter results, according to Dutch broadcaster RTL, which first reported the extended sick leave.

“A lot of things are uncertain now, as we really don’t know when Buechner will return. We don’t know if there is a plan B, if they’re talking about a successor or what to expect going forward,” Micha Tiekink, an analyst at Rabo Securities said by phone. Tiekink has a buy-rating on Akzo.

The Dutch national joined a company with annual sales of 15.7 billion euros ($20 billion) in need of an efficiency boost across its diversified operations, analysts said. Buechner faces writedowns on goodwill and brand names of as much as 2 billion euros, alongside other charges linked to a cost-savings program, according to a Sept. 28 report by Credit Suisse analyst Chris Counihan.

Global Presence

“There is reason for concern on how this will develop,” said Corne Van Zeijl, a fund manager at SNS Asset Management in Den Bosch with Akzo shares in its portfolio. “There’s a difference if you’re CEO of a local company or a company like Akzo which is all over the world. The share price won’t react favorably.”

Having opted for an external candidate last time around, it’s unlikely they will look within the company for a successor, ING’s Smeets said.

Buechner has indicated that his strategy would focus on operational improvement and building on strategic positions rather than making large portfolio changes.

A decision on Akzo’s under-performing decorative paint business in the U.S. would likely not be forthcoming, analysts said. His predecessor, Hans Wijers, highlighted that once a turnaround of the Glidden paint brand sold throughout Wal-Mart Stores Inc. in the U.S. was completed, a decision on the future of the business within the company would be taken.

Troubled Start

Akzo shares may also be punished for the manner Buechner’s extended leave was announced. Rather than issuing a statement, news emanated from the RTL interview yesterday with Akzo supervisory board member Karel Vuursteen.

“We always knew there was a chance it would take longer as he doesn’t have a broken leg,” said Van Zeijl. “This was a guy who has been brought on board with some fanfare and he is well-respected. Akzo had to make a difficult choice on how to communicate and they opted for this way. In hindsight, we will know whether this was the right choice.”

The company will now be under pressure to give more information about Buechner’s ailment, said Erik Gordon, professor at the University of Michigan’s Ross School of Business.

“So far, it is listed as ‘‘fatigue’’, but if he is not quickly back at his post, investors will want to know more detailed information about his condition or about a succession plan,” Gordon said by e-mail. “It is an unusual and uncertain situation and the lack of details about it makes investors all the more concerned.”

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